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Economy in Brief

German IP Rises as EMU-wide IP Stirs
by Robert Brusca  October 9, 2013

German industrial production rose by 1.4% in August after falling by 1.1% in July. All three-major sectors reversed declines in July to advance in August.

In the quarter-to-date, German IP is rising at a 2.8% annual rate, led by a strong advance in capital goods which offsets declines in consumer goods output and intermediate goods output. The sequential growth rates show improvement from 12- to 6- to 3-months for capital goods. For intermediate and consumer goods the improving sequential trend breaks off for three-months. Germany's improving trend is being carried by its capital goods sector.

The chart above, that describes the pattern in the year-over-year growth rates for these sectors, shows a very choppy pattern for capital goods; this month marks an upswing. For intermediate goods the annual growth rates are getting progressive larger although they still are negative. For consumer good output, there was an improvement early in 2013, but since then consumer goods output trends have been skimming just below zero, posting a steady diet of small declines ever since.

For other EMU and EU members that have reported early IP results, we see that the quarter-to-date output trends are up for five of the six early reporters.

However, trends are more equivocal. Ireland, the UK and Norway show steady accelerations from in their growth rates over shorter spans: 12 months to 6-months to 3-months. Portugal shows sharp improvement of its 3-month and 6-month rates compared to its year-over-year rate. Spain and the Netherlands show recent faltering.

Germany's growth progress is solid in terms of its reported growth rates, but not shared by all sectors. It may rely a bit too much on capital goods. That sector's strength will not endure if the rest of the eurozone falters. The UK result is quite good and its improvement is widespread. The NISER (National Institute of Economic and Social Research) holds that the UK recession is over but it looks for output to remain below its peak for some time. The rest of Europe is still struggling and we continue to mark its progress month by month - and still with a degree of skepticism.

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