ANZ Morning Brief: Germany succombing to weakness in Eurozone?

GERMANY SUCCUMBING TO WEAKNESS IN THE EUROZONE? Preliminary data from the German Federal Statistics Office showed the economy to have contracted by as much as 0.5% in the December quarter, potentially signalling that the German economy joined a majority of other Eurozone nations in entering technical recession in 2012. Annual growth slowed to 0.7% in 2012 (from 3% in 2011) as the sovereign debt crisis finally impacted upon German exports and investment. Looking ahead, note the Bundesbank forecasts that the economy to stabilize from the first half to 2013. However, Europe ’s periphery remains another story, and we struggle to fathom where growth will surface from amidst a rising tide of austerity.

FITCH SIGNALS AAA DOWNGRADES IN THE PIPELINE IN 2013. Fitch said overnight that the AAA ratings of France , the UK and the US are likely to come under increasing pressure in 2013 due to tepid growth and high debt levels. The three are already on negative outlook. Fitch also said that failing to raise the US debt ceiling would prompt a “formal credit rating review” for the US rating. The OECD is projecting gross debt as a % of GDP to rise to 108%, 110% and 113% in 2013, in France , the UK and the US respectively.