Macro Digest: Germany may have won the World Cup, but its economy is cooling fast

https://www.tradingfloor.com/posts/germany-may-have-won-the-world-cup-but-its-economy-is-cooling-fast-1076281

 

Germany may have won the World Cup, but its economy is cooling fast

Steen Jakobsen

Chief Economist & CIO / Saxo Bank

Denmark

·          

·         Triple whammy from Asian rebalancing, US economy and bad energy policy

·         Economic deceleration is too quick for comfort

·         Unlike its footballers, Germany became complacent

 

By Steen Jakobsen

 

We need to congratulate Germany on its World Cup win. It was a victory for organisation and science, but unfortunately the Germany economy is slowing fast — and too fast for comfort when we look at Eurozone GDP.

 

I have long argued this slowdown was coming based on Asia rebalancing (reducing imports of capital goods and turning more domestically-based); Bad energy policy (being dependent on Putin and his Russian gas rather than German nuclear energy — not exactly perfect substitution); A new minimum wage and a coalition government that has either reversed or halted a lot of the progress that had been made in the labour market.

 

Unlike its football team, Germany became complacent and the switch to a reliance on green energy is now at risk as growth collapses.

 

A few charts to illustrate my old argument ...

 

 

 

ZEW expectations

 

 

 

Industrial Production

 

 

 

Strategy:

 

This confirms that we are destined for new lows in yields in core Europe, something I have constantly said since Q4-2013. The world is barely producing growth with zero interest rates — how can ANYONE believe rates will go higher? Beats me!

 

Therefore: Long IEF, Bund futures and 10-year US Treasury notes.

 

 

 

Congrats with the World Cup boys, but your economy? Oh dear.

Photo: Wikimedia Commons/Agência Brasil

 

— Edited by Clare MacCarthy

 

Steen Jakobsen is chief economist and CIO at Saxo Ban

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

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