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Economy in Brief

German Orders so Long Resistant to Weakness Have Fully Succumbed
by Robert Brusca September 4, 2008

German orders are clearly falling. Orders are dropping from domestic sources as well as from foreign sources. The degree of decline is accelerating both domestically and from overseas; the degree of the drop is substantial.

The new quarter is quite new, but one month into it, the degree of decline is severe for orders and sales.

Orders are weak enough and have been weak enough for long enough that real sales are starting to show adverse trends. Over three months all major sales categories are showing significant volume declines.

In comment today Nout Wellink of the Dutch central bank warned that the credit crisis would linger for several years. European Economic and Monetary Affairs Commissioner Joaquin Almunia said that, "We're experiencing a serious economic downturn…’ he attributes the slip to several causes but adds that fears of recession are exaggerated. Still, the notion of recession is haunting Europe as it has haunted the US. Former BOE governor Eddie George said, "My impression is that most forecasters now expect little growth if any at all across the industrial world as a whole over the next year or so ahead, and certainly technical recession cannot be ruled out."

In Germany there seem to be a difference of opinion on the subject. Up until now most pronouncements have been upbeat hold-the-line sort of things. But yesterday, Deputy Economy Minister Walther Otremba said in an interview that, "Economic indicators and surveys are clearly pointing down and we must expect a slump." He added, "The crisis won't be over quickly; whether or not things will pick up next year is doubtful." Still, yesterday German Finance Minister Peer Steinbrueck also said, "It is completely irresponsible for some pessimists to proclaim, on the basis of just one single quarter of slightly negative growth, that the specter of recession is looming,"

Europe’s data are weak enough to talk of slumps and recessions; the talk is not all on the back of one quarter of declining GDP. Europe’s policymakers (at least the ones in office) do not want to entertain that notion, however. That reluctance suggests either that they are unrealistic or plan to do nothing to avert the growing weakness.

German Orders and Sales By Sector and Origin
Real and SA % M/M % Saar
  Jul-08 Jun-08 May-08 3-MO 6-Mo 12-Mo YrAgo QTR-2-Date
Total Orders -1.7% -2.6% -1.3% -20.0% -10.6% -4.1% 7.2% -20.7%
Foreign 0.3% -4.5% 0.1% -15.3% -8.0% -3.4% 7.0% -15.2%
Domestic -3.6% -0.5% -2.9% -24.7% -13.2% -4.8% 7.5% -25.8%
Real Sector Sales
MFG/Mining -2.3% -0.2% -0.7% -12.2% -6.3% -0.7% 5.8% -15.0%
Consumer -0.4% -1.4% -0.1% -7.2% -3.7% -2.5% 1.6% -7.8%
  Consumer Durables -3.4% 1.7% -3.2% -18.1% -9.5% -4.7% 2.9% -18.6% 
  Consumer Nondurables 0.2% -1.9% 0.6% -4.6% -2.3% -2.1% 1.4% -5.3%
Capital Goods -4.4% 0.9% -2.5% -21.9% -11.6% -1.0% 7.8% -24.9%
Intermediate Gds -1.0% -1.0% 1.5% -2.3% -1.1% 0.4% 6.4% -6.9%
All MFG-Sales -2.1% -0.3% -0.7% -12.1% -6.3% -0.8% 5.5% -14.6%
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