The bifurcation between the USA and Europe is now official as Europe contracts and the USA expands. While the USA isn’t exactly booming there will be an official difference of 2.9%-10% in various national GDPs when compared to the USA. And Deutsche Bank says the worst is still to come:
“With a decline of 0.1% (qoq) EMU is now officially in recession, the decline was marginally lower than expected by the market. While the periphery remained firmly in recession (IT -2.4% yoy, ES -1.6%, PT -3.4%, GR -7.2%) France (0.2% qoq, 0.1% yoy) and Germany (0.2% qoq, 0.9% yoy) still managed to stem the tide.
The French economy has been bumping along for the last four quarters and German GDP growth is clearly decelerating. Both economies will probably show a negative print in Q4 (Germany -0.3%, France -0.4%), which means that EMU GDP could fall by almost ½% in the final quarter. We expect that an improving global environment and a positive credit impulse will generate some momentum in 2013. But even if our assumption of stabilization already occurring in Q1 and a modest recovery thereafter is correct, the poor starting level into 2013 implies that annual average GDP in EMU will shrink again by about ¼% (2012: -½%). Our 2013 forecast for Germany has been marked down to a meagre ¼% from 0.8% previously. We therefore remain at the low end of the consensus, which looks for 0.8% (EMU: 0%) but was compiled before the Q3 release.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.