German Orders...Not Marching Orders But Crawling Orders...

German orders fell by 2.7% in January, an unexpected development. The drop follows a gain of 1.6% in December and a large 4.9% drop in November. As a result the three-month growth rates are deteriorating for orders. Foreign orders are off especially sharply at a 31% annual rate with the drop accelerating sharply compared to its six-month drop at an annual rate of 11%. Domestic orders in Germany are off by a still-sharp 7.9% annual rate over three-months but those orders did manage to rise month-to-month in January gaining back 0.9% after two straight months of falling. Still, the three-month rate of decline is slightly ahead of the six-month pace of -7.5% and both show an accelerated drop in domestic orders compared to the -2.5% 12-month slide.

Real sector sales are declining across all manufacturing segments domestically. The monthly profile shows that all sectors are experiencing an increasingly rapid drop-rate with the exception of capital goods and intermediate goods. Still, the slippage in those two sectors is only barely less than their respective rates of decline over six-months and much more rapid than the pace over 12-months. For MFG as a whole the pace of sales decline is accelerating for three-months compared to six-months.

As to export orders ‘abroad’ to places outside the Euro-Area, the orders from outside the 17-nation euro region plunged 8.6 percent in January after having surged by 12.1 percent in December. The other piece of German foreign orders, non-domestic Euro-area orders, slipped 0.4 percent after a 6.5 percent decline in December.

While regional exports within the Zone (orders that do not cross any currency lines) held up a bit better this month, they still fell and fell after a sharp drop the month before. The Zone itself is under a lot of pressure and we have just seen the service sector PMI slip badly in February. Some of the data that had been pointing to resiliency in EMU is not so any more.

Still the German metrics are head and shoulders above the rest of Europe. The German rate of unemployment is still at its lowest since German re-unification. It is a sad and sorry fact that Germany has ‘just been able to successfully reconstitute Germany’ at the cost of having the rest of the EMU region fall part. While the condition of the EMU is not something that can be placed fully on German shoulders, as the locomotive economy it is very clear that Germany has designed the Zone to work best with German economic values. Germany has spent its time exploiting the Zone for the things that would help it the most. Meanwhile, no whistles were blown to try and stop the excesses that cropped up elsewhere. Now Germany wants no ownership of those problems not even for the problems its own bank lending helped to foster. Germany and France were at the forefront of efforts to scupper the Mass-Trick agreement which was the flimsy agreement to corset Zone-wide fiscal policy. No one blew the whistle on countries whose domestic inflation rates exceeded the EMU norm month after month after month.

The bottom line is that someone somewhere in the Zone has to take responsibility for its performance. The only thing about the Zone for which that happens is the euro. The whole of the Zone is set up to support the currency, instead of the other way around. Now keeping the single unit and keeping it strong will be increasingly difficult with the way the ECB has used its balance sheet, with the extreme differences in competitiveness within the zone, and with the fractured political environment.

Europeans once derided non Europeans for not seeing the handwriting on the wall that proclaimed European resolve that would keep the Zone together. But now the Europeans themselves have gained some distance and perspective and with their backs up against a different wall they can now read the true handwriting that they before did not recognize for what it was.

All Europeans are created equal...except that some are more equal than others...

Simple resolve cannot overcome facts: the facts of the European debt situation, of its competitiveness issues, of its political impasses and of its eye’s closed ‘Don’t put your burden on me’ way of dealing with what they have wrought. All this makes the euro end-game a real tangled mess. It is not about Greece, really at all. Greece is still a minor player. There is so much more left to do and no one wants to do it and no one wants to help anyone else to do it. Finally, all Europeans are of one mind about something. But given all this agreement they differ

German Orders and Sales By Sector and Origin
Real and SA	% M/M			% SAAR
	Jan-12	Dec-11	Nov-11	3Mo	6Mo	12Mo	YrAgo	Q-2-D
Total Orders	-2.7%	1.6%	-4.9%	-22.0%	-11.2%	-5.0%	16.7%	-18.5%
Foreign	-5.5%	4.3%	-7.8%	-31.7%	-14.2%	-7.1%	20.6%	-28.6%
Domestic	0.9%	-1.8%	-1.1%	-7.9%	-7.5%	-2.5%	12.2%	-4.2%
Real Sector Sales
MFG/Mining	0.4%	-1.4%	-1.3%	-8.8%	-8.2%	0.6%	12.9%	-5.8%
Consumer	-1.7%	-1.3%	-0.2%	-12.1%	-5.3%	0.2%	0.5%	-14.6%
Cons Durables	3.5%	-4.0%	-0.9%	-5.9%	0.0%	0.2%	6.5%	2.5%
Cons Non-Durable	-2.5%	-0.8%	0.0%	-12.5%	-5.9%	0.2%	-0.3%	-16.7%
Capital Gds	1.5%	-1.8%	-1.8%	-8.2%	-9.2%	2.1%	18.5%	-1.8%
Intermediate Gds	0.4%	-1.2%	-0.7%	-6.1%	-7.9%	-0.9%	14.0%	-4.1%
All MFG-Sales	0.4%	-1.4%	-1.2%	-8.5%	-8.2%	0.6%	13.0%	-5.6%