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Economy in Brief

German Orders Growth Extended
by Robert Brusca October 7, 2009

Order Trends: German new orders growth was extended as foreign orders snapped back after a one-month decline. Domestic orders fell by 1.9% after surging by 9.5% in July. Orders have been rising steadily, strongly, over the past six months with domestic orders up in five of those six months and foreign orders up in four of those six months. Both series are showing continuing acceleration not just growth. In the current quarter domestic orders are outpacing on the back of a one month 9.5% spurt in orders in July as the new quarter began.

Foreign order sources: Orders from countries outside the euro zone alone jumped 5.9%, in August while foreign demand for German manufactured goods from the other 15 countries sharing the euro rose by just 2.8% in August from the month earlier. Growth outside of the e-Zone drove German orders this past month.

Euro-Area policy cuts no slack - Apart from orders, the European Commission Wednesday warned nine countries, including Germany, that their budget deficits are too large. This is the legacy effect of having used domestic deficit spending to bolster the economy in the recession. That policy response was good thing, but it now puts those countries afoul of EU Commission rules.

Out of touch with reality? The warning comes at an odd time since Euro-central bankers and policy officials in the US have underscored that the time is not right to withdraw stimulus. Hanging the ‘Sword of Damocles’ over the heads of the various ECB nations does not seem like the right policy tilt to encourage them to keep their stimulus efforts in place. It sounds a lot like pressure to get you house in order NOW! The EU Commission is using bad judgment and being too strict on rules of evaluations at a time like this. Yes it is just this sort of thinking that keeps the euro strong but it also unduly complicates and hampers policy. This stance reminds me of the ECB’s problems in cutting rates in timely fashion in the recession. The target rate ceiling on the HICP hampered the ECB in the pits of the crisis. It cut rates as a part of an ‘international effort’, using that as an excuse to cut rates with headline inflation well over its ceiling at the time. I suppose we are to understand that this warning from the EU Commission as a formality that has come as scheduled. But in times such as these what is the merit? Does this act brand the EU Commission tough or as out of touch?

German Orders and Sales By Sector and Origin
Real and SA % M/M % Saar
  Aug-09 Jul-09 Jun-09 3-Mo 6-Mo 12-Mo Year Ago QTR-2-Date
Total Orders 1.4% 3.1% 3.8% 38.7% 17.8% -21.1% -2.4% 43.7%
Foreign 4.6% -2.4% 6.9% 42.1% 19.2% -24.0% -3.8% 30.7%
Domestic -1.9% 9.5% 0.5% 35.5% 16.4% -17.6% -0.9% 59.5%
Real Sector Sales
MFG/Mining 2.7% -0.5% 1.1% 13.8% 6.7% -16.6% 1.8% 14.4%
Consumer 0.4% -0.7% 0.1% -0.8% -0.4% -8.4% -3.0% -4.8%
Consumer Durables 1.6% 0.5% -2.6% -2.3% -1.1% -20.6% -1.8% 3.8%
Consumer Nondurable 0.2% -0.9% 0.5% -0.8% -0.4% -6.2% -3.2% -6.3%
Capital Goods 4.2% -2.0% 1.4% 15.4% 7.4% -20.9% 4.8% 18.7%
Intermediate Goods 2.5% 1.3% 1.6% 23.9% 11.3% -16.2% 1.0% 22.9%
All Manufacturing Sales 2.6% -0.5% 1.2% 13.8% 6.7% -16.9% 1.9% 14.3%
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