Brexit has Europe cautious, new German growth spurred on

German growth has been on the receiving end of a well needed push as increased construction figures led the continents biggest economy to its best quarterly rate in two years.

 However, the potential British exit from the E.U. could throw caution to the wind as experts reserve judgement on future economic performance until after June’s referendum.

A drop in interest rates has also meant much higher consumer data, another welcome factor that has spurred growth.

“Obviously if consumers see no advantage to saving money then they will shop till they drop,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “Another factor we see was the large German spending in aid of immigrants. That is going to have an effect on GDP growth and construction data,” he added.

Coleman remains cautious though. ”We can’t get carried away unfortunately. One thing that may very well rock the boat is the Brexit vote coming up soon. We can’t be certain which way this will go.”

Britons will take to the polls on 23^rd June to decide whether or not they wish to remain in the European Union.

Super start

It’s been a lightening start to 2016 and the growth forecast by Germany's DIHK Chambers of Industry and Commerce has been raised to 1.6 percent from 1.2 percent previously.

DIHK boss Martin Wansleben exclaimed recently “We are predicting a great year for the economy in general after the construction and consumption data was analysed.”

Export data isn’t quite as cheerful; with sagging foreign demand likely to be a drag on growth.

A surprise boost to the economy came from the results of the refugee crisis. Government spending is expected to reach a huge 10 billion euros in 2016, much of this being spent in the construction sector on shelters for the homeless.

2015: A business summary

Commodities

Last year was not the best for mining as a dip in Chinese growth sent prices falling across the commodities spectrum. Some of the main losers were copper and oil both of which slid by over 25 percent.

Consumers, however, are counting their savings as petrol prices and other basic products dropped in price.

Most observers are blaming China, and its stagnating development, for the declines and iron ore suffered the worst drop having plummeted over 85 percent from its crest in 2010.

The China factor

The meteoric rise of China over the last 20 years in undeniable. It became manufacturing headquarters for the entire globe and a major factor in world economic growth. But last year the behemoth stopped eating up all the commodities the Earth was producing.

Now India, China’s biggest regional competitor, has faster growth. Chinese data puts growth at below 8 percent.

Some experts think the figures are inaccurate and the situation could be a lot worse in reality.

Tony Harris, Senior Vice President of Equity Trading at Softbank CIBC International says the issue could be a drop in confidence in the leadership of the nation. “It’s not so much their style of leadership that is the problem here,” Harris said in an email yesterday, “The problem is more that they really have nothing to work with to turn the situation around. Capital outflow is just too high. Half a trillion in outflow is no joke.”

Harris added that when you pare this with failed interest rate adjustments and a massive annual rise in government spending, China have been left in a bad place.

“It’s as if there has been a total reversal in the economic policies,” he said.

Other experts are more optimistic saying the government still has some wiggle room. “There is still a possibility the authorities can avoid a financial crisis,” said Jonathan Fenby of Trusted Sources research group, “This is not to say there will not be massive slowing of growth for at least a couple of years….there definitely will.”

Japan recession calls for desperate measures

A much maligned sales tax has been put on the back burner as Japan’s PM calls for dissolution of government.

Japan’s Prime Minister Shinzo Abe has called for an early election in order to garner public support and tighten his grip on power over an opposition party struggling to keep up a united counter front.

Abe’s much talked of strategy to revive a flagging Japanese economy, “Abenomics”, has failed to hit the ground running and the country’s growth has continued to stagnate.

He announced in a press release last week that he would “dissolve the lower house as of the 21^st,” and added that he “needs to know the population support our economic plan. If we are voted down then our Abenomics are clearly an unwanted reform.”

Expert financial spectators are admiring the move and say the PM wants to eliminate any possibility of political instability before proceeding.

“Japan is a far cry from the times when there would be a change of PM whenever the wind turned direction,” said Tony Harris, Senior Vice President of Equity Trading at Softbank CIBC International.

“Abe is looking to solidify his position just in case public opinion moves against him as he puts his Abenomics into fourth gear,” he added.

Not the desired result

The plan, by the previous administration, was for a jump in sales tax to curtail Japan’s massive public debt; however the policy had a disastrous side effect.

Japans consumers simply stopped buying on the high street, and the government never got its income boost.

Data is now showing that Japan, the world’s third largest economy, is in the grip of a recession.

In response to that, Abe’s popularity has waned and opinion polls now have him at just 50 percent, his lowest level since he was elected prime minister two years ago, a factor that has forced him to call for the election early.