FOREX TRADING

German Industrial Production Improves Ahead of GDP Data This Week

Today, Germany released another upbeat data after the buoyant news released recently; marking that the worst is over and the largest economy in the euro area will lead growth in the third quarter as it did in the second quarter.

The Euro Zone’s gigantic economy released its Industrial Production showing improvement in September coming in at 2.7%, higher than the revised 1.8% and median estimates of 1.0%. Also, on the year the reading inclined to -12.9% compared with the revised -16.5% and expectations of -14.4%.

The economic data in the last month of the third quarter may give a clue that the economy will probably expand in the third quarter. In the second quarter, Germany grew unexpectedly to 0.3%, reducing the contraction in the 16-nation economy to 0.2% from 2.5% in the first quarter.

At the end of week, the euro zone will release its GDP for the third quarter where expectations are cementing that the euro area will emerge from the worst recession since WWII. Trichet mentioned last week that the economy will recover gradually, and growth will appear in the second half of the current year, where he expects GDP to improve on the quarterly basis.

Domestic as well as global demand improved since the second quarter with the vivid signs of recovery signaled by large economies. German exports inclined 3.8% in September from a month before which may lift growth in the third quarter as Germany relies heavily on its sales overseas.

Today’s report showed that production of investment goods climbed 5.9% and consumer goods advanced 2.3%, while construction output slumped 1.8% in the month.

German recovery is gathering strength with the improvement witnessed in goods along with stock markets that rose remarkably. Mercedes-Benz announced that its sales increased by more than 20% in the third quarter, while DAX index jumped above 50% since March. Also, Allianz announced that its profits increased in the third quarter by more than double.

Expectations are referring to an 0.75% expansion will be signaled in Germany in the 3 months ending September, while the Deutsche government raised its outlook for the economy in October to 1.2% growth next year after a 5% contraction during the current year.

Meanwhile, there is optimism after the stellar data released from large economies and after the G20 pledged to continue with the stimulus tools to support their economies.

Angela Merkel introduced 85 billion euros stimulus to be spent on infrastructure in addition to cutting taxes and encouraging purchasing new cars for old ones. Besides, the ECB announced 60 billion euros bonds purchase program after slashing the borrowing cost to a meager 1% to revive the economy.

These measures will continue despite the recent discussions concerning unwinding stimulus measures. Trichet sees that there are upside risks from the stimulus measures and therefore they should be withdrawn soon. Friday’s GDP data will give a clear picture about the economic status of the economy and thereafter there may be announcement about the time of withdrawing the stimulus.

Ecpulse

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