Germany: Lost in Stagnation - ING
Carsten Brzeski, Chief Economist at ING, suggests that disappointing new
orders add to latest evidence that the German industry is currently
caught in stagnation.
Key Quotes
“German
new orders dropped sharply in February, adding to evidence of continued
stagnation in the German industry. New orders declined by 1.2% MoM,
from an upwardly revised increase of 0.5% MoM in dropped in January. On
the year, new orders were up by 0.5%. The last months have not been easy
for the German industry. Since May last year, new orders have dropped
in six out of ten months. Interestingly, the February drop was driven by
falling foreign demand (-2.7% MoM), while domestic demand picked up
somewhat after a two-months slump.
While the German industry is
struggling to gain momentum, the Eurozone’s most favorite crisis is
back. Leaked minutes from an internal IMF discussion and the arrival of
Greece’s creditors in Athens is a good reminder that the Greek crisis
could easily escalate again and lead to another hot Greek summer in the
Eurozone.
The lack of growth in Greece and other Eurozone
countries could easily put new pressure on the German government to
reassess its entire crisis management. Eventually it could come down to a
decision between a growth stimulus for Greece, debt restructuring or
Grexit. We don’t dare to tell which option the German government would
choose.
Against the background of potential new uncertainties,
the outlook for the German industry remains anything but rosy. Product
expectations have already come down significantly since the summer and
are now at the lowest level since March 2013. At the same time, order
books have narrowed. The only encouraging signal from the German
industry is the latest drop in inventories since the beginning of the
year.
All in all, yesterday’s new orders were another piece of
evidence that the German industry is treading water, as it is suffering
from a cooling of global activity.”
(Market News Provided by FXstreet)
