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Economy in Brief

Germany Stands On Its Own Two Feet, But Can It Pull?
by Robert Brusca  July 6, 2011

German foreign orders have shrunk in May as German domestic orders have spurted. Monthly disconnects occur in this series but this one is very large. With this month’s results the domestic orders are now carrying the burden of German orders growth; domestic orders have grown faster than foreign orders (Yr/Yr) for three months in a row. Over three months foreign orders are down at a 20% annual rate while domestic orders are expanding at a 50% pace helping overall orders to advance at about an eight percent pace. Similarly over six-months foreign orders are lower and domestic orders are up. Over twelve months both series are advancing but domestic orders are up at about three-times the pace of foreign orders. This is the largest margin for domestic orders to exceed foreign orders in well over a decade.

As debt problems have spread in the Euro-Area Germany’s success in getting overseas orders has slipped. With the new Moody’s downgrade of Portugal it is clear that the Euro debt situation is about much more than Greece. With Greece’s situation off the front burner there is always someone else to take its place on the Euro-debt hot-seat. Indeed, the ruling by Moody’s which looked at the handling of the debt crisis and plan to make lenders share the burden of failing debtors is behind the downgrade. That makes it makes it pretty clear that the factors that led to a downgrade of Portugal could easily become operative elsewhere. The Zone is at risk.

But as of May the German economy is still a strong spot in a weak zone. German real sector MFG sales were mixed this month and did fall overall. But in the quarter-to-date they are still rising at a 6.9% annual rate. Overall orders are still advancing in the quarter at a 12.8% annual rate with foreign orders contracting and domestic orders up at a very strong 37% annual rate. The German domestic economy is now carrying the load not the foreign orders. Germany therefore seems to be entering a phase when growth will not be led or even augmented by exports. Will this make Germany and engine of growth to help support the rest of the Zone? Time will tell.

German Orders and Sales By Sector and Origin
Real and SA % M/M % SAAR
  May-11 Apr-11 Mar-11 3Mo 6Mo 12Mo YrAgo QTR-2
Total Orders 1.8% 2.9% -2.7% 7.9% 13.3% 12.2% 24.2% 12.8%
Foreign -5.8% 3.5% -2.9% -19.8% -5.1% 6.4% 28.3% -4.4%
Domestic 11.3% 2.2% -2.6% 50.8% 39.4% 19.0% 19.7% 37.5%
Real Sector Sales
MFG/Mining -1.1% 1.0% 1.0% 3.8% 2.8% 6.2% 12.6% 6.7%
 Consumer -4.5% 3.8% 2.2% 5.1% 1.5% 1.8% 1.8% 17.8%
 Cons Durables -1.4% 1.3% 4.1% 16.9% 11.6% 6.0% 10.1% 15.0%
 Cons Non-Durable -5.1% 4.3% 1.8% 3.0% -0.2% 1.0% 0.6% 18.6%
Captial Gds -0.9% -0.5% 1.6% 0.7% -5.8% 5.9% 14.2% -1.5%
Intermediate Gds 0.2% 1.2% 0.3% 7.0% 14.3% 9.4% 18.0% 11.3%
All MFG-Sales -0.9% 0.9% 1.1% 4.5% 3.2% 6.3% 12.8% 6.9%
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