Rise in German industrial orders bodes well for coming months
German industrial orders increased unexpectedly in October thanks to domestic and non-euro zone demand, data showed on Wednesday, suggesting this sector of Europe’s biggest economy is likely to gain steam in the coming months. Contracts for ‘Made in Germany’ goods rose for a third consecutive month, with Economy Ministry data showing factories took 0.5 percent more orders in October than in the previous month despite bulk orders being below average for the month. The reading confounded expectations in a Reuters poll for a 0.3 percent drop and came after an upwardly revised 1.2 percent increase in bookings in September. “Industry is continuing to fly high,” said Alexander Krueger, economist at Bankhaus Lampe KG. “In light of the strong preceding months, the moderate growth in October is a good result.” But he said high capacity utilization made him suspect the pace of growth would not pick up further despite bulging order books. The German economy has been expanding since 2010 and gained traction in the third quarter but worries are mounting as Germany still lacks a new government more than two months after a national election.
PBOC expert cautions central banks against too low for too long interest rates
A senior Chinese researcher has urged central banks to adopt monetary policies that do not encourage markets to expect the indefinitely lower for longer interest rates that encourage excessive risk-taking by lenders, the Securities Times reported on Wednesday. The paper reported Sun Guofeng, director general of the People’s Bank of China’s research institute, saying that if central banks kept interest rates low for very long periods then lenders, who have a natural tendency for risk-taking, would take on excessive leverage. Sun, who made the comments at a financial conference in Beijing, said ultra-low interest rates were the root cause of asset bubbles and that was why China was establishing a double framework of monetary policy and macro-prudential assessment (MPA) to cope with cycles in the financial system, the paper reported. Sun noted that the U.S. Federal Reserve’s move to shrink its balance sheet was aimed at raising long-term interest rates to prevent another financial crisis, the newspaper reported.
House Conservatives Warn About Spending After Backing Tax Cuts
A faction of conservative Republicans is raising warnings about federal spending, two weeks after backing tax-cut legislation that would raise federal deficits by $1 trillion over the next decade. They warn that compromises struck with moderate Senate Republicans, as well as negotiations to keep Democrats from filibustering spending bills, will contain measures that increase government spending. House leaders say the best tactical move is to extend the government shutdown deadline to Dec. 22, while conservatives instead are pushing for a funding extension until Dec. 30. Current funding runs out on Saturday. Mark Meadows, the North Carolina Republican who is chairman of the conservative House Freedom Caucus, wouldn’t say how far he’s willing to push Republican leadership. His goal is to make sure “we don’t end up bloating our federal spending any more than it already is.” As Congress turns attention to funding the government after months devoted to passing the tax cut package, some of the lawmakers who dismissed Congress’s own analysis that the tax cuts would add deficits are raising alarms about spending.