Expect German economy to do well in H2CY13: StanChart

Sarah Hewin, regional head of research, Standard Chartered-Europe says Germany's economy, despite weak private sector data in April, still has some strong fundamentals. Given that Germany is the engine of growth of the eurozone, Hewin is also bullish on the eurozone's robust growth in H2CY13.

Hewin’s view comes on the back of German factory data that climbed 2.2 percent in March as against a 0.5 percent correction expectation. The German factory orders fell 0.4 percent in March, year-on-year, vis a vis a forecast of 2.9 percent decline.

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"Investment has been weak last year and it should come back again this year if there is strong enough demand domestically and externally,” adds Hewin in an interview to CNBC-TV18.

Below is the edited transcript of Hewin’s interview to CNCB-TV18.

Q: The reason we decided to get into this German data and a little bit more detail is because the data from yesterday and today on factory orders and industrial output seems to be at contrast with the slightly softer data and sometimes even negative data that we have seen in the last month and a half. What do you make of yesterday and today’s data?

A: They are certainly very encouraging particularly in light of the slightly weaker survey data that we have seen from the purchasing manager’s indices (PMI) and from the IFO index. Both these surveys suggest that manufacturing certainly was on the soft side in March and moving into April. So, it has come as a bit of a surprise. It’s encouraging. I think that there is some sort of pullback here. We had a very weak fourth quarter in Germany. So, the first quarter of this year seems to show something of a bounce back following that fourth quarter weakness.

Q: But would you say that as confidently because you pointed out to IFO and the PMI data, even the GDP growth forecast for Germany is far lower this year than it was for 2012. We saw 0.7 percent last year. We are now looking at almost half of that growth. The sentiment is weaker depending on which index you see and the trade data hasn’t been very encouraging either. What should one make of what the second quarter will mean for Germany if you are saying the first quarter has turned up a little bit towards the end?

A: I think there are some encouraging signs. Obviously, the surveys have been softer but we have to look at what the hard data is saying. We need to see how things progress over the coming weeks in terms of what the survey evidence is for the outlook.

The first half of this year is certainly sort of struggling across the region and we think that there is stronger potential for the second half of the year. Some of the fundamentals in Germany are still pretty strong. The consumer side ought to be underpinned by rising real incomes. There is immigration into Germany as well of course. Investment has been weak last year and it should come back again this year if there is strong enough demand domestically and externally.