Euro­zone econ­omy ab­sorbs Brexit shock; Ger­many hit

Un­cer­tainty about Trump’s trade pol­icy clouds out­look

Kuwait Times - - BUSINESS -

The euro­zone econ­omy grew steadily in the three months af­ter Bri­tain’s shock vote in June to leave the Euro­pean Union but US Pres­i­dent-elect Don­ald Trump’s pro­tec­tion­ist rhetoric is cloud­ing the out­look for 2017.

Un­cer­tainty about the trade pol­icy Trump will pur­sue once he takes of­fice is weigh­ing on euro zone sen­ti­ment, in­creas­ing the like­li­hood that the Euro­pean Cen­tral Bank will re­tain its loose mon­e­tary pol­icy to sup­port growth in the 19coun­try bloc. Gross do­mes­tic prod­uct (GDP) in the euro­zone ex­panded by 0.3 per­cent in the third quar­ter, on a par with April-June, the EU’s sta­tis­tics of­fice said yes­ter­day, con­firm­ing an ear­lier flash es­ti­mate.

The data showed “the pace of growth in Spring could be main­tained de­spite the Brexit vote in June,” NordLB an­a­lyst Chris­tian Lips said. “That was far from self-ev­i­dent.” But “we now have the elec­tion of Don­ald Trump as the new US Pres­i­dent, whose pol­icy is less pre­dictable and whose po­lit­i­cal in­ex­pe­ri­ence and im­pul­sive­ness are likely to be a con­sis­tent source of ir­ri­ta­tion,” Lips added.

Un­cer­tainty about the length and out­come of Brexit ne­go­ti­a­tions be­tween Lon­don and Brus­sels is also ex­pected to limit the euro zone’s medium-term growth prospects while Trump’s talk of pro­tec­tion­ism has un­nerved big ex­porters like Ger­many. Europe’s largest econ­omy eked out weaker-than-ex­pected growth of 0.2 per­cent in the third quar­ter as for­eign trade slowed.

“Pos­i­tive im­pulses on the quar­ter came mainly from do­mes­tic de­mand,” the Ger­man Fed­eral Sta­tis­tics Of­fice said. “Both house­hold and state spend­ing man­aged to in­crease fur­ther.”

Higher in­vest­ment in con­struc­tion also contributed to over­all growth, sug­gest­ing the ECB’s record-low in­ter­est rates are sup­port­ing the eco­nomic re­cov­ery. “In our view, the lat­est less dy­namic growth fig­ure is not a rea­son to be con­cerned,” UniCredit economist An­dreas Rees said, adding that most for­ward-look­ing data sug­gested the Q3 slow­down was a bump in the road, not a sig­nal of longer-last­ing weak­ness. DekaBank an­a­lyst An­dreas Scheuerle agreed, say­ing the signs for the fi­nal quar­ter were pos­i­tive as global de­mand for Ger­man goods was pick­ing up again.

Sup­port­ing this view, a sur­vey by the Mannheim-based ZEW in­sti­tute showed that the mood among Ger­man in­vestors im­proved more than ex­pected in Novem­ber.

ZEW Pres­i­dent Achim Wam­bach at­trib­uted the fourth con­sec­u­tive monthly rise in the eco­nomic sen­ti­ment indi­ca­tor to pos­i­tive data in the United States and China. “The elec­tion of Don­ald Trump as US pres­i­dent and the re­sult­ing po­lit­i­cal and eco­nomic un­cer­tain­ties have, how­ever, had an im­pact,” Wam­bach said, adding that re­sponses re­ceived af­ter Trump’s vic­tory were less up­beat than those be­fore.


In Ber­lin, Chan­cel­lor An­gela Merkel told a busi­ness con­fer­ence the Ger­man econ­omy was do­ing fine and had shown it could adapt to a chang­ing global en­vi­ron­ment. In a thinly veiled warn­ing to Trump, she cau­tioned against pro­tec­tion­ism. An­ton Bo­erner, head of the BGA trade as­so­ci­a­tion, said a trend to­wards iso­la­tion and pro­tec­tion­ism would pose a threat to euro zone ex­porters. “Growth is de­clin­ing, un­cer­tain­ties are ris­ing,” he added, re­fer­ring to Ger­many. — Reuters


PARIS: Pub­lic fi­nance of­fi­cers wave flags of French trade union CGT as they gather in front of the Min­istry of Fi­nance to protest against job cuts yes­ter­day in Paris.

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