Allianz

Ahead of the decisive elections on 6-9 June, the 6th edition of our Allianz Pulse survey finds huge divisions in views of the EU. We asked 6,000 people in the large member countries Germany, France, Italy, Spain and Poland, as well as Austria, about their views on political and economic issues, and their outlook for the future. We found that only the Spanish (net percentage: +25.8%) and Austrian (+21.5%) respondents seem happy to be part of the EU. In Germany (which used be “pro-European”), Italy and Austria, the opinions are
almost evenly split, while French respondents remain firmly “anti-European” (-22.3%).

The lights are still off in the US office sector. While commercial real estate has a few bright spots – notably logistics and data centers – that are benefiting from the boom in e-commerce and artificial intelligence, the office segment shows no signs of recovery1. Since the pandemic lockdowns, the shift to remote work has eaten into demand for office space, sending the vacancy rate soaring to 20% (Figure 1), and this trend looks set to continue. The US office price index2 is already down -24% so far in 2024 and we expect the slump to continue through the year (by further 8pps), with a stabilization only expected in 2025.

According to the Allianz Global Insurance report, the global insurance industry grew by an estimated 7.5% in 2023, clocking the fastest growth since 2006, the year before the GFC. In all, insurers worldwide collected EUR6.2trn in life (EUR2,620bn), p&c (EUR2,153bn) and health (EUR1,427bn) insurance premiums. Over the last three years alone, global premium income increased by a whopping EUR1.1trn or 21.5%. However, the robust development must be seen against the backdrop of high inflation. In real terms, therefore, the picture is becoming less impressive. Real premiums almost stagnated, advancing only by 0.7% since 2020.

US auto tariffs: Can the EU follow suit? The bark of higher US tariffs on Chinese goods is worse than the bite: The latest move will lift the global effective US tariff rate by a meagre 0.2pp to 2.7%, and the effective tariff rate on Chinese goods by 1pp to 13.5%.

Mithridatism: after the trade recession, exporters are more optimistic in 2024 but also more concerned with (and also more used to?) geopolitical risks, shortages of inputs and labor and financing and non-payment risks.

Eurozone: Green shoots for growth just in time for the Eurovision. Just in time for the Eurovision in Malmö 7-11 May, the Eurozone has emerged from five quarters of stagnation (+0.3% q/q in Q1), indicating the start of a gradual economic recovery. Meanwhile, ongoing disinflation continues in line with expectations, with core inflation dropping to 2.7% – the lowest level in more than two years. However, the economy continues to show a clear divide, with a thriving services sector and a lagging goods sector, each impacting overall growth and inflation in distinct ways. In this context, we continue to expect the ECB to initiate two rate cuts this year, starting as early as June.

The biodiversity financing gap exists mainly due to a knowledge gap: the valuation of ecosystem services. Ecosystem services are the direct and indirect contributions ecosystems (known as natural capital) provide for human wellbeing and quality of life. This can be in a practical sense, such as providing food and water or regulating the climate. We understand that the productivity and regulatory functions of ecosystems are of great value to our economic sectors, but we have little understanding of the price tag of this value, let alone the abatement costs (and benefits) of declining ecosystem services.

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