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Economy in Brief

German Orders Wither Reincarnation to Take Longer
by Robert Brusca  March 7, 2013

German orders fell in January damping a good bit of optimism that had been growing about how Germany is turning it all around. Its PMI readings form Markit have improved and are showing expansion this month-real strength in domestic services. But German orders are only partly domestic and the rest of the Zone while 'turning' with Germany is not showing a gain, just slower declines.

Before the 1.9% drop in German orders in January came a 1.1% gain in December orders and before that orders had fallen by 2.6% in November. Orders have been choppy: up Vs down for five months running. There have not been back to back orders gains in adjacent months since February and March of 2012, nearly one year ago. On that sort of pattern it is hard to make a case for a turnaround, although one is not strictly precluded.

Over three months and over six months overall orders and foreign orders are lower - and are decelerating. Domestic orders are flat over three-months which is a bit better than foreign orders, and they are falling by only 2.2% over six months, not the 4.7% drop of foreign orders. But over 12-months domestic orders are weaker than foreign orders dropping by 4.6% compared to decline of 0.3% for foreign orders.

Domestic real sector sales (presented in the bottom of the table) do show that domestic conditions seem to have improved over the recent 3-months compared to 6-months and 12-months earlier. Still, the sector is still looking at broad-based declines- just not declines as deep as they were previously.

Looking more deeply into the report, the German Economy Ministry reported that the number of 'large orders' was well below average in January.

Also, the decline in 'foreign orders' was led by a 4.1% drop in demand from the other 16 European Union countries that use the euro, reversing a gain the previous month. Orders placed by other foreign countries, outside the Zone, dropped by 2.3%.

Troubles in the rest of the Zone continue to haunt Germany. Although the Germans are the most competitive country in EMU, the lack of growth within the EMU boundaries is a challenge even for Germany.

The trend in German orders weakness mirrors the weakness in US exports and is wholly predictable based on the reports for unevenness foreign growth. German exports may be among the first to revive globally, but reports of their reincarnation may have been premature.

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