In the first quarter of 2019, businesses with legal entities increased by 6.4 percent compared to the previous year. In particular, long-term loans were taken over by companies. However, according to Kfw Research, there is no sustainable trend.
As the current credit outlook for KfW Research shows, the momentum in the first three months of this year remained almost as high as in the last trimester of 2018. Growth was 6.6 percent above the level of the previous year. Economic development in Germany since the second half of 2018 proved "quite disappointing," analysts KfW say.
Special effects on vehicles fueled demand for capital
Interestingly, the trend towards long-term credit exposure, despite lower economic momentum, a shrinking corporate sentiment and uncertainty over global trade disputes and the upcoming Brexit. With money, companies funded investments, which rose unexpectedly from January to March by 1.9 percent compared to the previous quarter. According to KfW experts, one of the reasons for this is the special effects of the automotive industry. In the second half of 2018, manufacturers were sometimes unable to register their models for sale through a new WLTP test procedure. The resulting congestion in production and sales was partially resolved in the first quarter of 2019. The camps that were created in 2018 were demolished, and the vehicles were delivered to companies early in the year. This process should also trigger new long-term lending commitments.
However, since this effect is only temporary, analysts expect growth of corporate investment to slow down over the year due to other factors. "The new Brexit ultrasound, which has only been delayed for several months, provides a good example of cyclic attenuation of the effects of such risks," the report said. However, risks also offer opportunities, analysts point out. If there is a solution to the trade dispute between the US and China, it should stimulate the economy of China, and hence the world. It is possible to make a deferred investment.
Analysts expect more short-term loans
The analysis also assumes that banks in this environment will be more cautious with lending. At the same time, the number of short-term loans could increase again. This required the company to finance stocks or to close the bottlenecks of liquidity. "All in all, the big year in the credit market is likely to be over," concludes the forecast.