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Brexit: euro zone jitters deepen

Thursday, June 30, 2016 - 01:49

German retail sales bounce back after two months of falls, but IMF officials say they're likely to mark German growth down, as Brexit uncertainty begins to bite on the euro zone. David Pollard reports.

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(UPSOT) (German) HEAD OF GERMANY'S FEDERAL LABOUR OFFICE, FRANK-JUERGEN WEISE, SAYING: "Demand for labour remains high...." Demand for workers is high, says the head of the federal labour office. And it is: at 6.1 per cent, German unemployment is as low as it's been since reunification. The impact of the UK referendum - still to be felt, it seems. (SOUNDBITE) (German) HEAD OF GERMANY'S FEDERAL LABOUR OFFICE, FRANK-JUERGEN WEISE, SAYING (on BREXIT): "Britain is a major trade partner: accounting for 7 percent of exports and 4 percent of imports ... Maybe some trade flows are at risk. There will be consequences but rather in the long term, and it depends on what's being negotiated now." In the meantime, the German consumer gets even stronger. Consumer confidence data this week at its highest in nearly a year - retail sales in May bouncing back after two falls. But after an ECB caveat on euro zone growth, the IMF is now hinting it'll mark down its German growth outlook. Brexit seen likely to pull purse strings tighter - as much for those shopping for shares, too. (SOUNDBITE) (German) CAPITAL MARKETS ANALYST, OLIVER ROTH, SAYING: "Both institutions warn the economy will suffer. That's becoming more and more apparent now. Uncertainty in the markets, but also in Berlin and Brussels, will remain over the coming months." And if strong consumer demand is pushing up prices, it's only just. Euro zone inflation edging back into positive territory in June with a meagre 0.1 per cent rise. The ECB and its chief still far from hitting their inflation target. (SOUNDBITE) (English) FXPRO, HEAD OF RESEARCH, SIMON SMITH, SAYING: "He's enacted various rounds of quantitative easing and other ... measures. The impact of those is only coming through slowly, so I think it remains a heightened issue for Draghi and the euro zone as a whole." Deflation one reason to expect more ECB stimulus. Britain's Brexit vote, increasingly, seen becoming another.