European markets are focused on the economic data today as the bond sell off is taking a rest. The most surprising economic data came out of France which reported extremely strong GDP reading. But than on the other hand, the GDP data from Germany fell short of expectations but still it produced a positive reading. You cannot be surprised with the reading and the reason being because the government investment is at 12 years low.
The quarterly average for the Eurozone’s PMI data earlier last month confirmed the reading of 53.3 while the same reading used to be at 51.5 a month earlier. Although, the German GDP data was below expectations but less not read too much into this reading and the reason being the German Zew and IFO data have both recorded their sharpest surge. Moreover, the house hold consumption has also improved. If Germany really wants to improve its out level than it need to start investing inits infrastructure. The reason being the German trade surplus is sitting at 7.9% this year and is forecast to reduced to only 7.7%.
This budget surplus is well above the ECB target level set and there is no fundamental justification of extra 3 to 6 percent additional budget surplus. One can blame as much as they want when it comes to Greece but investors should not under pin the consequence of this affair getting more attention which could boil more trouble for the Eurozone. The fact is that it is difficult to keep one party to keep on bending to your demands when others are getting away. Germany is not the only country when it comes to break the rules, the europe’s second biggest country, France have their budget deficit well beyond the limits of ECB.
So the question which really matters is what if all other countries stop paying attention to their budget deficit or surplus and start dealing their affairs according to their own manner.