End of the Wirtschaftswunder? - Carsten Brzeski of ING said that the German data was a "growth normalisation" rather than a "disappointment" on its own, as Germany should still grow by at least 3% this year. He warned, though, that the German economic recovery is clearly slowing. "Looking ahead, the million-dollar question is whether a solid second quarter is the beginning of the end of the German Wirtschaftswunder [economic miracle] and whether recent market turmoil could push the economy back into recession," said Brzeski. "While German politicians are currently racking their brains on the pros and cons of common eurobonds, the luxury of having an economy running at 'wonder' speed is fading away." Gary Jenkins, head of fixed income research at Evolution Securities, said the German data will "only add to the concern of the market that we are running into headwinds that are going to make a difficult situation even worse". French and German officials have already indicated that Merkel and Sarkozy will not discuss the idea of issuing eurobonds – debt backed by the whole eurozone rather than individual countries. Jenkins believes that eurobonds appear to be the "least worst option at this stage". He said: "A temporary fiscal union may be the endgame, where you have common bond issuance for five years that replaces all individual sovereign bond issuance, after which time that is phased back in over, say another five years. Thus you retain a modicum of moral hazard." Stock markets across Europe fell in early trading, with the FTSE 100 dropping 73 points to 5277. The euro lost ground against the dollar, as traders reacted to the news that Germany had reached near-stagnation. "Following on the back of weak GDP data announced by France this will further undermine any efforts to resolve the eurozone debt crisis," said Max Johnson, a broker at forex specialist, Currency Solutions. But he added: "Looking around the global economy, at least there will be few, if any, cases of schadenfreude."
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Tuesday, August 16, 2011
End of the Wirtschaftswunder? - Carsten Brzeski of ING said that the German data was a "growth normalisation" rather than a "disappointment" on its own, as Germany should still grow by at least 3% this year. He warned, though, that the German economic recovery is clearly slowing. "Looking ahead, the million-dollar question is whether a solid second quarter is the beginning of the end of the German Wirtschaftswunder [economic miracle] and whether recent market turmoil could push the economy back into recession," said Brzeski. "While German politicians are currently racking their brains on the pros and cons of common eurobonds, the luxury of having an economy running at 'wonder' speed is fading away." Gary Jenkins, head of fixed income research at Evolution Securities, said the German data will "only add to the concern of the market that we are running into headwinds that are going to make a difficult situation even worse". French and German officials have already indicated that Merkel and Sarkozy will not discuss the idea of issuing eurobonds – debt backed by the whole eurozone rather than individual countries. Jenkins believes that eurobonds appear to be the "least worst option at this stage". He said: "A temporary fiscal union may be the endgame, where you have common bond issuance for five years that replaces all individual sovereign bond issuance, after which time that is phased back in over, say another five years. Thus you retain a modicum of moral hazard." Stock markets across Europe fell in early trading, with the FTSE 100 dropping 73 points to 5277. The euro lost ground against the dollar, as traders reacted to the news that Germany had reached near-stagnation. "Following on the back of weak GDP data announced by France this will further undermine any efforts to resolve the eurozone debt crisis," said Max Johnson, a broker at forex specialist, Currency Solutions. But he added: "Looking around the global economy, at least there will be few, if any, cases of schadenfreude."
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The rise in annual consumper price inflaton was higher that economists' forecasts of 4.3pc.
Core inflation, which strips out volatile components such as food and energy, accelerated to 3.1pc from 2.8pc.
Meanwhile, the retail price inflation (RPI) gauge, which includes housing costs and is the benchmark for many wage deals, stood at 5pc, in line with forecasts.
Rail passengers will see an 8pc jump in fares next year as result of today's data, because price increases on regulated fares such as season tickets are calculated by adding 3pc to the level of RPI in July.
The pressure on commuters comes at a time when all households are seeing their budgets squeezed by rising inflation and muted wage growth - with utility price increased announced by major energy suppliers including British Gas and Scottish Power.
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