German Q3 economic growth surprised to the upside but it dashes hopes for a fiscal stimulus boost
A good point being pointed out by a couple of Bloomberg writers in their articles this morning is that Germany could do with a worse Q3 GDP report rather than a better one right now.
It sounds kind of convoluted but it does kind of make sense if you think about it.
On the one hand, the report sees the country avoid a recession and gives hope that the economy may yet turn the corner eventually. However, it continues to take pressure off lawmakers to loosen the purse strings and carry out fiscal stimulus.
The issue in the sense for Germany right now is that the manufacturing recession is grinding the economy to a standstill but not to the point of a disaster as it hasn't quite spilled over to other sectors (such as services) of the economy.
For market participants, it then comes down to a matter of where do you draw the line with regards to the issue above.
In my view, I'm not expecting a significant recovery in global trade and the manufacturing sector any time soon. However, any deep recession in the German economy may take longer to play out as the spillover effects are still in its infancy stage.
So, with the German economy resigned to a slow and sinking ship, the euro currency itself may not find much reprieve as lawmakers have a reason to stay sidelined.
As such, sometimes a good thing can turn out to be bad and in the case of German economic data today, it maybe would've been better if the Q3 GDP report was worse.
