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Economy in Brief

German IP Takes A Hit But Not A Lethal One
by Robert Brusca August 06, 2010

Despite there being strength in industrial orders German IP took a set-back in June falling by 0.6% as MFG IP fell by 0.8%. However this drop follows a sharp 2.9% gain in May and it leaves the three month growth rate only marginally below the six month growth rate at 15.1% compared to 16.8%. Both still represent significant accelerations from the Yr/Yr pace of 10.8%.

Indeed, new orders growth has slowed over three-months compared to six-months even though those growth rates are fantastically high. Orders growth rates continue to run at about twice the rate of growth of industrial output. Whatever has happened to damp German IP in June, it seems to be more of a technical issue than a fundamental one. Switzerland posted a drop in its rate of unemployment for the recent month and Spain, despite threats of austerity has posted stronger growth in Q2 than in Q1.

On balance Europe still is growing and Germany continues to benefit from export-led growth so the health of the rest of Europe is important to Germany’s prospects. No economy grows without respite and, in the wake of the shocks in Europe it is surprising that growth has remained so consistent even now. There still is no assurance that Europe’s troubles won’t catch up to it eventually. But for now Germany’s path seems solid and the monthly set back to industrial output looks more like a bump encountered by a car still traveling at high speed on the autobahn.

Growth in the second quarter in both output and orders remains quite strong. It continues to be led by intermediate goods and investment goods with the output of consumer goods positive but a clear drag on the overall rate of growth. Despite this vision of the German economy breezing along and hitting the occasional speed bump, the consumer is still locked in the boot and only along for the ride and not really enjoying it at all- at least not yet.

Total German IP
Saar exept m/m Jun-10 May-10 Apr-10 3-mo 6-mo 12-mo Quarter
to-Date
IP total -0.6% 2.9% 1.2% 15.1% 16.8% 10.8% 23.5%
 Consumer 0.2% 1.6% -1.3% 2.0% 1.6% 4.7% 3.1%
 Capital -1.1% 4.1% 0.2% 13.6% 16.5% 10.3% 23.8%
 Intermed -1.0% 3.1% 2.8% 21.3% 27.8% 17.0% 31.1%
Memo
Construction -0.9% -1.9% 2.5% -1.4% 13.4% 3.8% 81.9%
MFG IP -0.8% 3.2% 1.1% 15.1% 18.0% 11.8% 23.2%
MFG Orders 3.2% -0.1% 0.0 28.9% 38.0% 24.5% 34.2%
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