Export-Led Slumps in Germany and Japan

April 8, 2009

Japanese merchandise exports recorded year-over-year declines of 46.3% in January, 50.4% in February, and 47.1% in the first twenty days of March.  In fact most of those losses occurred over the past six months.  A monthly 4.9% drop in seasonally adjusted exports in February was the smallest decline since September and left the export level at half its size from last August.  Foreign orders for Japanese machinery dived 49% between December and January and were 71.2% below the level in January 2008.  February machinery orders get released tonight. Core private orders are expected to decline about 8.5% on month.

Five straight monthly declines left German seasonally adjusted exports in February 21.6% below their September, a drop of 44.2% if annualized.  In the year to January-February, exports recorded declines of 21.7% to other Euroland members, 26.9% to Britain and other economies in the EU but not part of the common currency area, and 22.7% to the United States, China, Japan and all other non-EU regions. Foreign orders for German industrial goods posted annualized declines of 10.4% in 1Q08, 11.9% in 2Q08, 23.2% in 3Q08 and 54.9% in the final quarter of 2008.  Their level in January-February was 19% below the 4Q08 level not annualized.  If such are unchanged in March from February’s level, the annualized decline last quarter will be 57.4%.  A healthy German economy is critical to the well-being of Euroland as a whole.  German officials remain more reluctant than their Japanese and U.S. counterparts to reflate fiscally, claiming that automatic stabilizers built into their economy — the social welfare system if you will — is relatively much more powerful than in the other two economies.  The trouble is that businesses are not going to boost investment spending without signs of a renewal in export activity, and consumption was not strong even before the recession.  In the year to the first quarter of 2008, German real GDP rose 2.1%, but final consumption expenditures edged only 0.1% higher.  A clear need for a Keynesian fiscal boost exists in Germany beyond the endogenous supports that officials cite.

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

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