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Economy in Brief


German IP Continues To Run Up
by Robert Brusca May 07, 2010

In the midst of chaos in markets in the aftermath of the US stock market snafu on Thursday and ongoing turmoil over Greece in Europe despite the Greek bail-out being substantially approved by all parties, Europe’s growth is looking better. German IP rose by a sharp 4% in March on the same day that the US was reporting nearly 300K in job gains for April. Ironically, in the midst of such upbeat growth reports markets are starting to get negative on global growth prospects over Greece.

The German report on strong IP shows us building strength over three-months compared to six- months. Both MFG and construction are building momentum. Unfortunately the output of consumer goods continues to not just lag but to decline and the pace of decline for consumer goods output has accelerated. But for intermediate and capital goods, output is advancing and accelerating strongly. Germany has a two-tier economy. One tier seems to be strongly supported by capital goods spending and orders linked to strong international demand. The other tier is its consumer goods sector that is weak both in Germany and abroad leading the output in that sector to falter. Still the message overall is that IP is advancing and doing so with strength and good solid underpinnings.

Our main point here, is that growth both in Europe and in the US is looking better, not worse despite what markets are doing. As for analysts, in an effort to look ‘smart’ they are always looking for a way to explain the ‘decline du-jour.’ But the recent news has been good, not bad. In recent days we have seen patches approved to stopper those things that could have gotten out of control and hampered growth. I’m not sure we want to throw a party for the March German IP report and the April US employment report (and its revisions) but we do have on balance net good news over the past two days. And that is not what markets are trading to. In the end, that is a point to ponder. But it’s not a reason to throw out the good news and go rummaging in the trash bin of old news for an excuse to explain what appears to be an irrational act by the markets, and one that could easily be reversed in the coming weeks. Markets have seemingly irrational sharp sell offs from time to time. Accept it. Think about it. But don’t let it cripple you or lead you to shove a square peg through a round hole to get closure.

Total German IP
Saar exept m/m Mar-10 Feb-10 Jan-10 3-mo 6-mo 12-mo Quarter-
IP total 4.0% -0.2% 0.1% 16.4% 3.9% 8.6% 3.7%
 Consumer 1.7% -2.3% -0.3% -3.5% -0.2% 2.9% 1.2%
 Capital 4.4% 1.2% -1.7% 16.4% 1.3% 6.9% 3.9%
 Intermed 3.5% -0.1% 3.4% 30.2% 9.2% 15.3% 8.5%
Construction 26.7% 0.0% -14.2% 39.8% 12.1% 1.6% -27.3%
MFG IP 3.4% 0.0% 0.6% 17.4% 3.7% 9.7% 5.0%
MFG Orders 5.0% 0.0% 0.1 49.1% 18.7% 26.0% 28.5%
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