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Economy in Brief

Germany Confidence Plows Ahead
by Robert Brusca  December 20, 2013

The German GfK consumer climate index has simply continued to expand. The index rise dates back to 2008 and it has risen from that point with only minor interruptions despite some real turbulence in the euro zone since the economic crisis hit. Economic expectations have been much more volatile overall, but they have begun to move up very sharply over the past year.

Germany continues to show confidence levels that are head and shoulders above those in neighboring Europe either for EU or EMU members. The German reading for January 2014 stands in the 92.5 percentile of its historic queue. That compares to the 37.1 percentile for Italy, the 20.5 percentile for France and the 82.6 percentile for the UK. Germany's level has been higher only about 7.5% of the time while Italy's reading has been stronger about 80% of the time.

Among fellow EMU members, Germany is leagues ahead and its momentum shows no sign of let up. This is yet another measurement that suggests that euro zone stability is still being undermined as nations are progressing at very different rates suggesting that national differences are becoming more divergent and that the notion that one monetary policy can serve such an area is becoming ever more strained.

The components for the GfK reading are available only through December. There we see a strong gain for the economy metric which rises from 20.3 to 23.3. The income measure is set back, however, at 39.5 in December compared to 45.2 in November. The buying climate also has eroded to 46.1 in December from 45.7 in November. Still, the climate gauge rose sharply in December.

Moreover, the monthly readings may possess some volatility but all the measures from climate, economic expectations, income expectations and the propensity to buy show strong gains over the last three- or four-months. The other GfK measures also show strong standings in their historic ranges. The relative weakest standing is in the economy variable that is also showing the most recent strength. It stands in the 77.4 percentile of its historic queue compared to an 82.8% standing for the propensity to buy and a 91.4 percentile standing for income expectations.

On balance the GfK readings are all strong and still showing positive momentum. Germany continues to distance itself from its fellow EMU members.

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