Following a near record surge in February, March German manufacturing orders plunged far lower than consensus, dropping -4.0% on expectations of a 0.4% rise, as a decline in investment goods limited growth in Europe's largest economy, the economy ministry said Thursday. "The participation of large orders was strongly below average," the ministry said in a statement. This eliminates any possibility of an ECB rate hike later today (to be followed closely by Zero Hedge), and validates our assumption that the ECB rate hike regime was flawed, and not only will Trichet not do anything today, but will be forced to return to a dovish stance within a few months, leading to a reversal of recent tightening and to a validation of Goldman's warning on the EURUSD which has at this point very likely topped out.
A little more from Goldman:
Orders fell substantially in March after robust increases in the previous two months (+1.9%mom (revised down from 2.4%mom) and +3.1%mom). This is a volatile series and large monthly changes may occur. We would need at least two months of declines before being able to asses whether any material change has occurred. Despite weak March manufacturing orders, business sentiment remain strong with the IFO assesment of orders rising in April. Manufacturing orders fell 4.0%mom in March, much weaker than expected (GS:+0.2%, Cons: +0.4%). The decline was broad based with both domestic and foreign orders declining (-3.5%mom and -4.3%mom, respectively).
And elsewhere, the BOE, also foolishly expected not to hike rates any time soon, just announced it is keeping rates flat at 0.50% as expected, a decision validated by yet another indication of the collapsing UK economy, for which a hike in rates would be the last straw. From Market News:
The rate of UK service sector growth decelerated markedly in April, while output prices rising to their highest level since September 2008, according to the Purchasing Managers Index from Markit.
Markit said the message from their trilogy of April PMI surveys was the UK economy saw a sharp loss of momentum at the start of the second quarter. The April services PMI fell to 54.3 from 57.1 in March, while the output price index rose to 53.8 from 52.2.
"The service sector suffered a sharp loss of growth momentum at the start of the second quarter. The survey's measure of business activity showed the second-largest fall since October 2008, exceeded only by the sector's weather-related slide back into contraction in December," Chris Williamson, chief economist at Markit said.
The survey showed the service sector returned to cutting jobs and Markit said its data suggested the economy was only growing 0.4% on the quarter - below estimates of trend growth.
The read across from the CIPS surveys, which do not cover some key areas of the economy, most notably retail, and GDP is not straightforward however, and recent GDP outturns have not correlated closely with the CIPS data.
Williamson said the deceleration in services growth reflected the fiscal squeeze.
And per the last sentence, we are certain that what this means is that instead of hiking, the BOE will very soon follow Japan into another QE expansion, and when that is confirmed to have no impact, our own Chairman will finally throw in the towel and get right back into the thick of currency destruction things.