Sandra Petcov Quotations

Fundamentals still do not support a strong rebound in German retail sales: real compensation per employee is declining noticeably and, even though unemployment has started to fall, employment is still on a downward trend.

We don't think business confidence is going to improve much more over coming months, but we don't expect it to fall off a cliff either. There's still support from the rest of the world and a slightly lower euro.

We had a particularly cold winter and the construction industry suffered, so this is simply a delayed pickup. Unemployment is falling, but it's no reason to rejoice. We need to see a sustained increase in employment, and that hasn't happened yet.

There's no doubt German firms are doing exceptionally well: order books are full to the brim and business confidence is at levels not seen since reunification. But they haven't started hiring yet. They know that in 2007 a very large fiscal tightening is envisaged, so this could be a short-lived rise in demand.

Consumers could raise spending by digging into savings, there's room. Though it may not be the most important thing right now, the persistent weakness in the labor market will weigh on confidence again.

The Fed and the ECB view monetary data completely differently. The emphasis the ECB places on this analysis is a little excessive. If we were in charge of interest- rate policy, we would keep them on hold.