Commerzbank predicts big surge in earnings for west German industry

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The Independent Online
WESTERN German industry can look forward to a surge in earnings this year, with the biggest gains going to firms in sectors that were hardest hit by the 1992/3 recession, according to a report from Commerzbank.

In the car industry, the German bank forecasts an increase in earnings of 191 per cent, compared with a slump of 74 per cent in 1993, described by one car maker as the worst for decades.

Even among car suppliers, which have suffered severely under manufacturers' demands for rapid and drastic price reductions, the bank predicts that earnings will rise by 120 per cent.

Commerzbank also forecasts a 35 per cent growth in profits among the big chemical companies, and one of 45 per cent among machine builders. The average rise in earnings across all the main economic sectors will be 26 per cent.

This change for the better is reflected in the growing mood of optimism in corporate Germany.

The combination of a favourable international economic environment and the easing of monetary policy at home have helped to boost production.

In 1994, the bank expects an average annual increase in industrial production of 1.5 per cent.

The greatly improved earning power of German companies is largely the result of enormous cost-cutting efforts, the bank said.

The modest wage round also helped, as did the long-term rationalisation measures. In 1993 alone, the number of jobs in western German manufacturing industry was reduced by 480,000, or 7.3 per cent.

The Commerzbank report pointed to the production gains and expected earnings forecast as grounds for dismissing claims last year that western German industry was undergoing a structural crisis.

'Above all, the recovery in exports - despite the relatively high rate of the mark against the currencies of numerous European trading partners - underlines the efficiency of German industry,' the report said.

But Commerzbank warned that firms would need to continue cutting their costs for some years, with several rounds of modest wage deals, if the jobs lost in the recession were to be won back.