EUROPEAN FISCAL: Somewhat Mixed Signals In German Fiscal Data

German spending picked up a little in October according to Federal Ministry data out yesterday but likely is still a bit slower than budgeted on net. This is broadly as expected as these risks have widely been seen already after the initial fiscal easing plans earlier this year. Debt take-up of the infrastructure fund has picked up quickly but questions around a misuse of its allowances for consumptive measures remain present.

• Core budget fiscal deficit amounts to E66.8bln through October - roughly around the median of deficits through October in recent years (see lower chart). While the deficit remains well within recent ranges, the speed of outflows has indeed accelerated recently, suggesting some further pickup may be in the pipeline.
• The E500bln infrastructure fund took up E12.8bln of credit in its first operational month, more than 1/3rd of the E37bln planned for this year. As mentioned, a set of institutes worry if these funds are in fact spent on infrastructure projects, however.

Sellside analysts also see some mixed signals in the data:

• Goldman Sachs think the data "showed a mixed picture regarding the pickup in spending [...] no acceleration of spending in the main budget or the off-budget military fund while we expected some pickup. A shortfall in annual spending relative to the budget looks increasingly likely. That said, spending in the off-budget infrastructure and climate fund increased strongly, more than the monthly spending required to reach budgeted spending by year end. Overall spending increased broadly in line with our expectations despite a surprise to the composition"
• JP Morgan think "overall, there is still uncertainty about the exact timing of Germany’s fiscal shift. Our sense is that the newsflow on defence is dynamic, with large orders being placed with German industry, and that the political necessity to improve German infrastructure is large. As a result, we think that possible problems with planning and delivery will largely be overcome. However, it will be important for the monthly budget data to provide reassurance"