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Economy in Brief

German Survey Hits The Heights – Stays There
by Robert Brusca  February 10, 2012

The DIHK survey has tied its all-time high measure in 2012 Q1. The German Chambers of Commerce, or DIHK, said its quarterly survey of 28,000 companies shows that the economy is on solid ground. Its headline makes a strong declaration and the other survey components back it up.

The business expectations index however, has slipped from its Q2 level. Earlier, in 2011 Q2, it posted a +25 reading, then fell sharply in 2011 Q3 and stayed at the lower levels for two quarters running as that reading gave way to +7 in Q3 and Q4 of 2011. It has slipped further to +5 in 2012 Q1. But even this lower reading sits in the top one third of its range expressed a queue of historic readings or as a position in its high/low range.

With troubles in the zone having heated up and global growth slowing down it is no surprise to find the export expectations index stuck at a +17 reading after falling from +35 in 2011-Q2. The +17 reading is a 53rd percentile standing in the ranked queue of historic value. It sits a bit higher at the 68th percentile of its high/low range. The number of respondents predicting their export activities will improve rose to 31% from 30% previously. More than half, however, 55%, said the situation would remain unchanged, compared with 57% previously. The proportion of those expecting a fall in exports rose to 14% from 13%. All this reflects a slight increased bifurcation in the outlook with no effect on the overall measure. All of these are relatively small changes quarter to quarter. The DIHK itself forecasts German exports to climb 3.5% this year after a rise of 8.2% in 2011.

Investment expectations are still very high-valued but they slipped in 2012 Q1 to +8 from +12 in Q4. The series made its last big step down from +18 in 2012-Q2. At a reading of +6 the investment intention index stands at the 77th percentile of this queue or lower at the 67th percentile of this high-low range.

Hiring intentions stood a notch lower in Q1 2012 falling to +8 from +9. That index has been slipping regularly by quarter. The +8 reading still stands at the 79th percentile of its historic queue of values and at the 69th percentile in its high-low range.

DIHK remains more optimistic than the German government about the outlook for the economy this year. It forecasts real gross domestic product growth of 1%, after 3% growth in 2011; this compares with the government's 0.7% growth forecast. Still, Germany's economy contracted 0.25% during the final quarter of 2011 and recent economic data have been very hard to read making it difficult to choose between the DIHK view of the world and the German Government view of the world.

Expectations for 2012 had been very low until a few end-of-year reports and some additional reports for early 2012 suggested that the ongoing drop in activity in Germany had stopped or given way to some increases. While many EMU members remain in difficult and challenged conditions, the outlook is up in the air as the recent stronger than expected economic data are changing some minds. DIHK members are relatively upbeat as all their responses are in the upper portion of their historic ranges. The current assessment as the ‘best ever’ at a +37 reading is one that has lingered for four quarters in a row. Despite some pessimism and challenges elsewhere in the euro-area the DIHK members have been upbeat consistently for the past year.

DIHK Economic Situation and Expectations Survey
  Q1'12 Q4'11 Q3'11 Q2'11 2Yr Avg Rank % Hi/Low%
Economic Conditions 37 37 37 37 27 98.1% 100%
Business Expectations 5 7 7 25 12 66.7% 66.7%
Export Expectations 17 17 17 35 23 53.7% 68.4%
Investment Intentions 8 12 12 18 10 77.8% 67.9%
Hiring Intentions 8 9 9 14 8 79.6% 69.5%
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