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Economy in Brief

German IP Slows Down...
by Robert Brusca September 8, 2010

IP makes lethargic rebound - German IP is up in July after a drop of 0.6% in June. That means IP is lower on balance over two months. July was not much of a 'bounce.' The weakness in IP corresponds with the drop in orders whose weakness showed up in July with a 2.2% drop. After a series of stronger than expected numbers Germany is beginning to post some figures suggesting that growth is becoming more challenged. That was inevitable for an economy trying to make its way on export led growth in a global environment of weak demand. Germany has yet to get its domestic demand in gear.

Sector trends - Sector trends show that capital goods trends are erratic but even three-month rates of growth are still strong. However, the fresh monthly data offer a different story of encroaching weakness on capital goods. Intermediate goods output has slowed from its earlier pace but is still growing. Consumer goods output is the one series that can make a claim for getting stronger as its three month growth rate exceeds both its six month rate and its 12-month rates and its recent monthly output numbers show consistent gains. Since this has been the weak sector maybe Germany is also in the process of some transition. It's too soon to tell about that.

MFG has momentum and bumps in the road - Manufacturing output is down for two months running but its three month growth rate is still solidly strong above 10%. While that may seem reassuring the recent monthly results have been below par and we still see that the orders series that is pointing to a slowdown.

Beep Beep! There is no unambiguous trend for Germany. It has posted strong numbers. It has been an island of strength in the midst of a growth-challenged Euro-Area and it did that on export-led growth. But now it is sputtering. In many ways Germany has looked like Wile E. Coyote of the Road Runner cartoons. Wile E is prone to stopping and skidding off the end of a high mesa but he defies gravity for a while, he does not fall until he looks down. Has Germany looked down recently?

Total German IP
Saar Except M/M Jul-10 Jun-10 May-10 3Mo 6Mo 12Mo Quarter-
to-Date
IP total 0.1% -0.6% 2.8% 9.8% 14.9% 11.3% 3.9%
 Consumer 0.5% 0.1% 1.8% 10.0% 3.0% 5.4% 7.1%
 Capital -0.7% -0.3% 4.1% 13.1% 17.0% 13.0% 2.8%
 Intermed 0.4% -0.4% 2.6% 11.0% 20.7% 16.4% 6.1%
Memo
Construction 0.9% -0.8% -1.8% -6.7% 54.6% 5.9% -1.6%
MFG IP -0.1% -0.2% 3.1% 11.9% 15.8% 12.7% 4.9%
MFG Orders -2.2% 3.6% 0.0 4.6% 19.8% 17.6% 0.4%
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