For Germany, Light At End Of Tunnel Still Just A Faint Glimmer

For Germany, Light At End Of Tunnel Still Just A Faint Glimmer

There’s tentative talk of a light at the end of the tunnel for Germany (and for the European economy more generally).

On Wednesday, data showed German factory orders posted a much better than expected 1.3% increase in September from the previous month. Consensus was looking for a meager 0.1% MoM rise.

Germany’s economic ministry gingerly suggested we could be seeing “a bottoming out of orders”.

Germany is, of course, mired in a deep manufacturing downturn, and calls for the abandonment (at least temporarily) of the “black zero” fiscal policy have grown.

Volker Wieland, a member of Angela Merkel’s council of economic advisers, warned Wednesday that the economy is teetering. “Manufacturing has been hit hard by the decline in world trade [and] industry is in recession”, he said. “Jobs may be lost and the decline in industry may draw down other sectors. Recession risks have risen, but our current diagnosis is we are not there yet”.

The council slashed its growth forecast for next year to just 0.9%. Data due next week will  almost surely show the economy sank into a technical recession in the third quarter.

Although September’s factory orders data offers a glimmer of hope, a quick look at the YoY figures betrays the same, stark reality. Orders fell 5.4% from a year earlier. It was the 16th consecutive decline.

Meanwhile, the final read on the eurozone composite PMI for October ticked up slightly to 50.6 from 50.2 on the flash print.

The picture is hardly “bright”, though. The eurozone economy has stagnated and is now bumping along near the flatline.

“Overall growth of the euro area private sector occurred in spite of a second successive monthly decline in new work”, IHS Markit said Wednesday, adding that “weakness was centered on the manufacturing economy, where another marked fall in new orders was recorded”.

Oh, and Markit also notes that “overall exports were down for a thirteenth successive month, with the rate of decline amongst the sharpest in the series history”.


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