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Economy in Brief

EMU Does Better Than Expected; Germany Best Of All
by Robert Brusca   January 07, 2011

German IP fell in November dropping by 0.7% following a surge of 3% in October. While the growth rate is half that for Yr/Yr growth it remains about the same for three months as for six months, and those rates are still fairly strong. Overall growth in the current quarter-to-date is very strong as well.

Capital goods growth rates are more or less stable at a still very elevated pace. Capital goods output is growing by 17.3% Yr/Yr and at a 16.5% pace over three months. Unlike the other two categories there is no sign of slowing here.

Behind the scenes MFG orders are slowing their growth but still growing at a double-digit pace over three months.

Can German output continue to be fueled by capital goods alone? We have seen that consumer confidence in the zone is very uneven. It is best of all in Germany. Yet German retail sales are not exactly on fire. How should capital spending across the zone be fueled in such an environment? This is still a nagging question behind the strength in the German output figures.

Today German retail sales results were disappointing although the results for the year will be improved from past years. Even so there is little evidence of the consumer getting back into gear especially with austerity programs some of which are just being implemented. Across the zone the prognosis for the consumer is worse. Improvement in German unemployment backtracked in its most recent report as well. While Germany is the best performing European economy its numbers and momentum are less than stellar. Within the Zone there are some countries in substantially worse shape. Consumer confidence varies over a wide span in the Zone. All this makes policymaking in the Zone very difficult and places great pressure on the ECB.

Total German IP
SAAR Except M/M Nov-10 Oct-10 Sep-10 3-Mo 6-Mo 12-Mo Quarter-
to-Date
IP total -0.7% 3.0% -0.9% 5.4% 5.6% 11.1% 12.7%
Consumer -0.7% 0.3% -0.1% -1.9% 1.6% 3.1% 0.4%
Capital -0.6% 4.6% -0.1% 16.5% 12.3% 17.3% 26.6%
Intermed -0.7% 2.6% -1.8% 0.0% 4.5% 11.8% 7.7%
Memo
Construction -1.1% 3.1% -0.4% 6.5% 3.4% 6.5% 11.5%
MFG IP -0.6% 3.0% -0.8% 6.1% 7.4% 12.5% 13.7%
MFG Orders 5.2% 1.6% 0.0 10.9% 17.2% 20.7% 13.2%
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