German Industrial Output Trends isWeaker Than Expectedly

German industrial output fell by 2.1% in October and its sequential growth rates show a steady drumbeat of negativism more than an acceleration of weakness. This is in stark contrast to the unraveling in orders. But order weakness always takes several months to become embedded in the behavior of output so the steadier path of output is not much in which to take solace. Finally it is the consumer sector that it showing some resiliency. But capital goods and intermediate goods industry output each show persisting deep if not accelerating declines in output. With the economic crisis spreading this resiliency by consumers will not be long lived. MFG IP shows relatively more weakness. And orders are pointing the way much lower.

Japan's current account balance has deteriorated severely this year. The balance for the first 10 months of 2008 was a surplus 14,943 billion yen, compared with 21,206 billion yen surplus in the comparable period of 2007, a decline of 30%. The first chart puts the magnitude of the decline in perspective.(We express the values in terms of billion yen, rather than the 100 million yen shown in the balance of payments data in Haver's JAPAN Data Base and in the attached charts)

Traditionally, Japan has had negative balances on Services and Transfers and positive balances on Income and Goods. The second chart shows these balances over the past twenty-three years. The deficit in the balance on services has tended to be less negative, and the balance on income has become more positive but it is clear from this chart that the major cause of the recent steep decline in the current account balance is the decline in the balance on goods. So steep has been the decline that in August and September, the customary surpluses on trade in goods turned into deficits.