Signs of Stability out of Europe with German PPI Release

Alan Penny

20 January 2020

2 min read

  • German Producers Price Index rises
  • Good sign for German economy
  • German figures represent picture of EU health

Early on Monday, the Germans released the PPI figures month-over-month, which is the Producers Price Index. This measures the cost of goods flowing out of production, which is a sign of German exports strength.

Germany’s economy is highly levered to the export market, so that is something traders should be paying attention to. Furthermore, as Germany goes, so goes the European Union.

The announcement

The Producers Price Index came out at 0.1% month-over-month, which was much better than the 0% expected. While this isn’t necessarily a barnburner of a number, the reality is that it is the latest in a string of European numbers that are at least showing signs of stability. With that in mind, it should continue to elevate the prospects for the European Union.

not quite time to celebrate yet, but it certainly looks as if the EU is starting to turn the corner in general

This is something worth noting as the German numbers are starting to turn slightly upward, and that will continue to further emphasize the notion of the EU recovering. It may well be another reason to think that the EU is starting to look a little bit more attractive, as has been seen recently in the currency markets.

It’s not quite time to celebrate yet, but it certainly looks as if the EU is starting to turn the corner in general.

Keep an eye on Germany

Going forward, it’s very likely that the market will continue to pay attention to other economic indicators coming out of the EU. It is worth remembering, though, that as far as the EU is concerned, Germany is by far the most important place to look. In fact, the Bundesbank has recently suggested that they see German GDP at 0.6% in 2020. With that in mind, it’s very likely that the European Union and its assets will continue to try to turn themselves around.

For traders to try to take advantage of any of this, it’s probably going to be thought of more as an investment than a trade. It’s very likely that the longer-term traders will be focusing on the outside of the European Union, while shorter-term traders continue to take advantage of the choppiness.

As the markets have been very noisy in general, a certain amount of money management will come into play in order to protect accounts. The longer-term investor looking to take advantage of the swing higher will probably be better served in taking little bits and pieces along the way, building up a core position that will explode in value as the EU corrects itself and finally moves forward.

Recently, however, it should be noted that the European Union is still lagging behind Asia and North America.

Written By
Alan Penny

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