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A Strained German Economy Can Be Good News For Europe
Friday 06 January 2023
Cross Asset
A Strained German Economy Can Be Good News For Europe
January 2023 | In Europe, due to high inflation and a fall in household and business confidence, the outlook remains uncertain, with a risk of gas rationing during the winter, which would cause industrial production to fall further. In the short term, the drivers of domestic demand (consumption and investment) have been weakened. High energy prices are weighing on industry, construction, and investment. Meanwhile, inflation is reducing real incomes and real wages are falling despite increases in negotiated wages and a strong labor market.
01 | This Month’s Topic: In one month, China dropped most of its Covid-related restrictions, vowed to support the housing market more, and set pro-growth policies. We expect the Chinese economy to be separated from the global slowdown in 2023.
02 | Thematic: The energy crisis resulting from the war in Ukraine has profoundly altered Europe’s economic performance and prospects. Countries have been affected unevenly, based on how dependent they are on Russian gas and oil.
03 | Global Research: Recession risks remain prominent for mid-2023 in the United States, while for Europe we confirm our expectations of a cost-of-living- and inflation-driven recession during the upcoming winter season.
Important Information
Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of January 06, 2023. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.
Other news
07/12/2024
Cross Asset
Mid-year outlook: It's all about confidence
In the aftermath of last year's global inflation surge and the subsequent tightening of monetary policies, the economic outlook now looks increasingly fragmented. The US is slowing down, the European Union is gradually recovering, China is in a controlled and policy supported slowdown, and countries such as India are experiencing strong growth. On the inflation side, price pressures are more persistent than expected, but gradually normalizing, allowing major central banks to start cutting rates. We believe investing will require confidence in the search for an asset allocation that can withstand different scenarios, with markets in some areas being priced for the best despite uncertainty stemming from geopolitical risks and the upcoming US elections.
05/16/2024
Cross Asset
Short-term resilience, but no reacceleration likely in the mid term
We have markedly revised up our forecast for US growth, in particular for H1 2024. We continue to expect GDP growth to decelerate below its potential pace over the next few quarters, before recovering in 2025. Regarding inflation, although the downward trend in core consumer price index inflation has recently stalled, we think that the disinflationary process will continue, albeit along a bumpy road with stickier dynamics. The Fed will still be in a position to pivot towards rate cuts and we expect 75 bps of cuts in 2024 (vs 40 bps by markets) as: (1) monetary policy remains restrictive and will become more restrictive as inflation declines; (2) growth will slow down; and (3) recent inflation data have not altered our year-end projections.
04/22/2024
Cross Asset
A window of opportunity for European equities
After a strong close to 2023 and a resilient first quarter, we expect the US economy to decelerate as we continue through 2024. The most vulnerable segments of the economy are showing signs of stress, although data on the broader economy remain mixed. We continue to expect inflation to moderate amid some volatility, particularly on the sticky services side, as domestic demand cools. We acknowledge the trend strength in risk assets, but high valuations are preventing us from massively shifting our risk gear upwards. The equity rally is broadening and we see a rotation towards European equities, where we have now a neutral stance.
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