EZA 893 Report:

30 April 2009

29 Apr 09 IMF – German economic institutes economic forecasts – calling the trough

•  The bi-annual economic outlook of the IMF on 22Apr and of the German institutes on 23Apr conveyed an even steeper decline in GDP and a later recovery than expected hitherto – both for Germany and for the euro area.
• The IMF forecast for 2009 GDP of -4.2% of the euro area and -5.6% for Germany are a reminder of the depth and the potential persistence of the current recession.
• Although we still think that the forecast numbers might lean too far towards the risk side and instead maintain our previous forecast of -3.5%/-4.5% for the euro area and Germany respectively.
• Recent sentiment data combined with fundamental underpinning of growth through early inventory bottoming and higher private and public consumption make us also slightly more optimistic on the prospects for 2010 than the institutes.
   

Asset conclusions: extreme weakness, forecast by the IMF can be seen as a result of past trends rather than forward looking growth. Hence recent improvement in European stock market sentiment justified.
 

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