More Bad News From Germany

March 12, 2009

Until passed recently by China in GDP rankings, Germany had been in third place.  Number two-ranked Japan and German are two of the hardest hit economies in this global recession, allowing China to widen its lead over Europe’s biggest economy and to close its shortfall relative to Japan.  Overnight in Asia, Japan released revised fourth-quarter national income accounts, showing annualized drops from the third quarter of 12.1% in real GDP, 44.9% in exports, 19.8% in business non-residential spending and 1.7% in personal consumption.  A revised upward revision to 2.0 percentage points in the growth contribution from inventories points to a huge GDP decline in the first quarter of 2009.

Germany’s news today was arguably more worrisome than Japan’s.  Industrial production fell by a record 7.5% in January.  Such fell at a 38.5% annualized rate in the five months between August and January, but the decline could accelerate in coming months because industrial orders plunged at a faster 60% annualized pace over the same five months.  In January, factory output dived 8.4%, led by drops of 12.3% in capital goods and 8.1% in intermediate products.  Construction fell 7.8%, while energy recovered 3.2%.  The prestigious Kiel Economic Institute just revised its 2009 German growth forecast to minus 3.7% in response to all this bad news.  Such a decline would be four times more severe than the previous worst calendar year since World War II.  Like Japan, Germany is heavily reliant on exports and thus vulnerable to the global recession.  German exports fell 20.4% between January 2008 and January 2008 but at a considerably faster 55% annualized pace over the latest three reported months.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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