U.S. and German Manufacturing, Greek Debt Burden Prominent in Export Risk Outlook

This year is starting out strong in the U.S., with retail sales rising higher than expected in January and December numbers revised upward, according to the Euler Hermes Export Risk Outlook. Manufacturing is also showing signs of improvement, with two Fed regional surveys quite strong. The Philly Fed Index leapt to its highest level in 33 years. Inflation rose in January, with much of the increase from a rise in energy prices, the fifth consecutive increase. Gasoline prices also saw their fifth consecutive increase, to a 20.3% year-over-year pace.

In the U.K., services continued to drive growth in the fourth quarter. Despite an uptick in inflation, consumer spending remained resilient. Exports grew strongly. Euler Hermes expects the U.K. economy’s resilience to persist until the direct Brexit negotiations begin with the European Commission, likely in the middle part of this year. Consumer spending is expected to take a hit with a rise in inflation and drive down growth in the second half of the year.

In Greece, recent short-term debt relief measures, approved in January and aimed at reducing the interest burden, are positive in the view of Euler Hermes. This is due to the fact that 80% of the debt is held by institutions and that principal repayment will not start for another 17 years. The credit insurer believes that acceptance of the International Monetary Fund as a technical advisor rather than a financial contributor would be the best for the parties involved as Greek financing needs are lower than planned.

In Germany, the Ifo Business Climate Index and the Manufacturing PMI showed an acceleration of new orders, with the PMI also revealing a strong increase in new export orders. Though global trade was weak last year, it is expected to accelerate in 2017. German export volumes are forecast to pick up markedly this year, Euler Hermes said.

– Adam Fusco, editorial associate

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