Market Flash: Global Growth Hopes Edge Higher

Edmond de Rothschild
By November 21, 2019 09:41

Market Flash: Global Growth Hopes Edge Higher

The big news item of the week was Germany’s third quarter GDP which rose 0.1%, narrowly missing a move into recessionary territory. Expectations were for a 0.1% drop and second quarter GDP was revised down to -0.2%. However, over a year GDP has only risen 0.5%. Brexit uncertainties and the trade war are still weighing on the German economy which is also handicapped by its dependence on autos amid a global sector slowdown. Note that Washington is soon expected to postpone tariff hikes on auto imports from the European Union. That at least would spare Europe, and German industry in particular, from an additional knock to growth. To deal with slowing German growth, the draft budget – which has been approved by a Bundestag committee – includes a 1.1% rise in spending to €362m, slightly higher than the €360bn finance minister Olaf Scholz mentioned in September. The budget will be put to the vote before the end of the year. An agreement has also been found between the two ruling coalition parties on an additional pension mechanism for people on low incomes. However, these are still timid measures considering worsening economic prospects and repeated calls from the European Commission and the ECB for Berlin to introduce budgetary stimulus. In the US, Donald Trump disrupted market sentiment by blowing hot and cold on the trade war with China. He said Beijing’s concessions were as yet insufficient but that they could improve to help both sides reach an agreement. China’s economic data continued to signal a slowdown, a major problem for the government. Consumer prices have been rising sharply due to hefty rises in pork prices. And October’s industrial production grew at a very disappointing 4.7% over a year, down from +5.8% in September. Investment also slowed further to 5.2% (vs. 5.4%) while retail sales revisited April’s all-time low of 7.2%, down from +7.8% in September. Social tensions at home mean Beijing desperately needs to underpin growth rates and the economy, all of which would require a lasting truce in the trade war.  

Edmond de Rothschild
By November 21, 2019 09:41

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