Quotes from Societe Generale:
– Next week, we expect German investor confidence (ZEW) to take a sizeable hit from the recent market sell-off and intensification of sanctions on Russia. Given Germany’s relatively large exposure to eastern Europe in general, many fear that Germany may be particularly vulnerable, at a time when its strength is needed more than ever for the euro area.
– Next week’s stalling Q2 GDP data are also likely to raise concerns, while June industrial production data this week will provide insights to possible temporary disturbance in Q2. While the recent weakness and geopolitical developments clearly highlights the risks, we take comfort in the recent resilient PMI data and a more open debate on the room for wage increases in Germany.
– This all bodes well for the continued rebalancing in Germany and we continue to expect close to potential growth in the second half of this year. GDP growth in Germany is however unlikely to be strong enough to counter euro area “lowflation” pressures, suggesting more ECB action early next year.
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