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Dollar Losing Ground As Equities Head North

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By Luke Heighton
     FRANKFURT (MNI) - Global growth is returning to something closer to normal,
the Bundesbank's head of banking supervision and risk control said Friday, while
Germany's economic engine "remains intact."
     Joachim Wuermeling, a member of the Bundesbank's Executive Board, said
increasing private household consumption, rising wages and the continuation of
favourable financing conditions meant the German economy was on the road to
overcoming a "weak phase".
     Here are the key points from the speech in Essen:
     --Wuermeling said fears of a global economic slowdown have been
exaggerated. This was particularly true, he said, given that in 2017 industrial
production, world trade and investment had expanded relatively strongly,
providing a significant base effect. Meanwhile, "the drivers of global recovery
remain intact".
     --Similarly, the fact that problems in Argentina and Turkey did not trigger
a conflagration in emerging markets should be regarded positively, Wuermeling
said, while a far-reaching trade war has not yet occurred. Rather, the current
talks between the U.S. and China are a positive sign.
     -- Economic policies in the U.S. and China are already responding to the
changing growth outlook. In China, additional measures have been taken to
support the economy, while the Fed has stated that it will be patient with
regard to possible further interest rate hikes.
     -- Eurozone growth did slow "considerably" last year, with sector-specific
and country-specific factors adding to weaker impulses from the international
environment. Nonetheless, "favourable financing conditions coupled with
continued employment growth and wage increases should ensure continued growth in
the euro area. In addition, a relaxation of fiscal policy in Germany (and in
other member states) has a supportive effect."
     -- Real GDP in Germany increased by an average of 1.5% in 2018, much slower
than in the previous year (+2.5% adjusted for calendar effects), according to
Federal Statistical Office preliminary estimates. In the third quarter of 2018,
Germany's economy shrank slightly, "due mainly to supply side difficulties of
the German automakers."
     --"Beyond the current weakness, however [...] the economic engine remains
intact. Positive impulses are to be expected in particular from the consumption
of private households, because the labour market situation continues to be
excellent and wages are rising sharply." After overcoming the weak phase, the
German economy is expected to grow at a similar rate to its capacity in 2020 and
     --In addition to trade disputes and geopolitical conflicts, Europe is
currently primarily preoccupied with the risk of Brexit, and there is still
uncertainty about what the future relationship between Britain and the EU will
look like. The banking sector's preparations for a hard Brexit "are making good
progress. But not only the banks must be prepared, but also their clients from
the real economy. Here I see some catching up" to be done.
--MNI Frankfurt Bureau; +49-69-720-146; email:
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: M$E$$$,M$G$$$,M$X$$$,MT$$$$,M$$EC$]
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