Sound bites: German ZEW optimism building momentum. Index surges to 48.2 in February from January's 35
Hope springs eternal and German business optimism for stronger recovery continues to build momentum. Tail risks for Eurozone implosion have clearly receded, but there is still a lot of dead-weight pulling down the potential for German recovery ahead. German export recovery is still inextricably bound in to the outlook for Eurozone domestic demand. Continuing recession in the troubled Eurozone economies and flat-lining elsewhere in the single currency zone remain huge risks for sustainable growth over the future. It is still a tale of two economies. Germany leading the way higher in terms of recovering confidence and a very slow road back to health elsewhere. The message for the ECB is on-going patience and over-easy policy for a long while. The trouble is that monetary conditions are starting to tighten with the stronger euro and the pay-back of liquidity by Eurozone banks. Eurozone rates will probably need to go lower and stay low for a very long while. Bundesbank strictures will have to be ignored.
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