ECB – Weak Data and German Slowdown
Germany is experiencing a slowdown in exports thanks to weakness in emerging markets, especially China which accounts for 6.5% of German exports. The slowdown in China could be more than is currently in the news and that will affect German exporters more.
On the other hand, the US, Spain and other parts of Europe have been positive for exports. Germany is still projected to grow at 1.5% (IMF estimate) next year. Low oil prices, interest rates and a weak Euro will also help offset the emerging market slowdown. Growth in US and UK will also help since exports to these two key countries exceed Chinese exports.
Particular at risk is the car industry since German automobile exports account for 18% of all exports. The recent Volkswagen scandal did not help things.
The rest of Europe is weak in general.
Key Theme: ECB will keep monetary conditions loose to promote growth. Expect additional liquidity in the form of QE to continue for some time. Rates are to remain on hold.
With the US and UK expected to increase rates early next year, the Euro should weaken further.