The German economy is losing momentum. Fundamental analysis for 15.10.2014

15.10.2014
A year ago, the German economy seemed unsinkable, and euro zone countries were “offered” to take an example of the reforms from Berlin, through which Germany went through at one time. And in recent weeks almost all the statistics show a growing problem - the fall in exports, the drawdown in industrial production and record low economic expectations. On this background, even Bundesbank is reducing its own forecasts for GDP growth.

If we look away from the purely economic side, the current downturn in Germany for the euro area as a whole is a positive development. The fact that there is a chance to mitigate the position of Berlin on a more active stimulus measures by the ECB. After all, even from the beginning of the debt crisis, any talk from the ECB about the possibility of asset purchases, immediately encountered strong resistance from German politicians.

It is most likely at the level of public statements we will hardly see any moves. The fact is that if Berlin will not offer resistance to the plans of France and Italy to a less accelerated deficit reduction, then questions arise with the voters. A repetition of rescue programs with the German budget is rejected by the majority of people in Germany, therefore the policy will continue to harp on all the corners of the need for continued fiscal consolidation.

However, the actual weakening of economic growth in Germany, even if it does not level it with the rest of the euro zone, at least it will make it easier for the ECB. Moreover, the possible of a return of a recession in the euro zone is not profitable and the Germans themselves, as the main pillar of the economy are exports. It should be noted that the current downturn is largely due to the weak performance in China, as well as "the war of sanctions", which led to a reduction in the supply of industrial equipment.

It is worth noting that even after the lifting of the sanctions on "dual use" goods of the EU, the Germans will not get back a certain part of the Russian market. Companies that relied on branded German quality, discovered suppliers from China, which previously few people paid attention to. For example, due to the failure of the German side in the supply of equipment for the upgrade of the Polytechnic Museum, almost similar technology was purchased from Chinese manufacturers.

Negative statistics from the United States sent the Eurodollar into a correction. Retail sales slipped by 0.3% with a simultaneous drop in PPI by 0.1%. On the other hand, given the rise in retail by 0.6% a month earlier, the picture is not so bleak. Consequently, further the likelihood of a renewed reduction in the Eurodollar that can get support from statistics for the euro area on Thursday, where rather weak data is expected.



 
RoboForex Analytical Department

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