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European Growth Dynamo Getting Dim - March German Manufacturing Orders Plunge, Kill Any Possibility Of ECB Rate Hike

Tyler Durden's picture




 

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.

 

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Thu, 05/05/2011 - 07:24 | 1242321 Cassandra Syndrome
Cassandra Syndrome's picture

Quantitative Easing cannot end. If it does end, it simply resets back to the purpose it was first set up for.

Thu, 05/05/2011 - 07:31 | 1242331 AUD
AUD's picture

Could this sudden, or maybe not so, hold on rates be behind the current rush into bonds?

The Yen is strong, the bond speculators might be looking to make a quick profit in Jap bonds on the back of the BoJ's Masaaki 'easy' Shirakawa.

 

Thu, 05/05/2011 - 07:32 | 1242334 Quintus
Quintus's picture

So let me get this straight.  The real economy is collapsing again in Asia, Europe and America.  Interest rates are going to stay down for 'An Extended Period' (i.e. Forever) and more QE is coming (EU/US) or in progress (Japan).

Deficit and debt are massively problematic everywhere and credit ratings are reaching the outer limits of credibility, even for the bought-and-paid-for ratings agencies.

Meanwhile thanks to the criminals at Comex, protection from the impending next wave of financial catastrophe in the form of Gold and Silver is on sale at bargain basement prices.

Excellent.

Thu, 05/05/2011 - 07:36 | 1242338 Sophist Economicus
Sophist Economicus's picture

Is this a great world, or what!    If it wasn't for bone-head politicos, making money would be ooooh soooo boring...

Thu, 05/05/2011 - 07:37 | 1242339 Cassandra Syndrome
Cassandra Syndrome's picture

But they got Bin Laden, so everything will be a-ok.

Thu, 05/05/2011 - 08:40 | 1242553 Popo
Popo's picture

True.  True.  But keep in mind that the economies of the first world have teetered on the edge of collapse (and indeed have collapsed, as in 1999-2000) several times in the past 20 years.

And where was silver?

Not everything always works the way it *should* work.

 

 

Thu, 05/05/2011 - 07:39 | 1242343 HitTheFan
HitTheFan's picture

Wow, ZH not mocking a Goldman Euro call....it's the twilight zone today.

Thu, 05/05/2011 - 08:17 | 1242450 idea_hamster
idea_hamster's picture

Today is opposite day -- ZH declared it oppositely by not declaring it.  (h/t Hobbes)

Thu, 05/05/2011 - 12:02 | 1243612 Smu the Wonderhorse
Smu the Wonderhorse's picture

You're making my tiny brain hurt.

Thu, 05/05/2011 - 07:36 | 1242344 swissaustrian
swissaustrian's picture

The ECB will hike rates, they want to fight inflation. That´s their mandate.

REAL rates are still way negative. Official (!) CPI is above 2 % yoy.

Thu, 05/05/2011 - 07:49 | 1242367 Quintus
Quintus's picture

Umm no.  The ECB cannot raise rates because then the Eurozone will fall apart.  Sorry Germany, those promises you got about 'No Bailouts', 'Strong Currency like the DM' and 'No Inflation' when you surrendered economic sovereignty aren't worth the paper they are written on.

Thu, 05/05/2011 - 07:40 | 1242352 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Reality is creeping upon the world's Central Banksters! The real economy is collapsing as it should have back in 2008. Print away, no one will put any faith in you any more. The SHTF moment is coming very close.

Thu, 05/05/2011 - 07:44 | 1242362 Tense INDIAN
Tense INDIAN's picture

JUST look at the Indian shares FALL...today fell for the 9th straight day. longest fall in 9 YEARS!!!!!

Thu, 05/05/2011 - 07:58 | 1242388 AUD
AUD's picture

How's the currency doing?

Thu, 05/05/2011 - 08:20 | 1242451 Hephasteus
Hephasteus's picture

Why not blog link? Show us.

Thu, 05/05/2011 - 07:46 | 1242365 Thepnr
Thepnr's picture

Italian unions on general strike tomorrow followed by Greece on 11th May, unrest in Europe among those most affected by the cuts can only get worse.

Thu, 05/05/2011 - 07:59 | 1242391 Bartanist
Bartanist's picture

I am just a little bit slow: "Why is growth good?"

Is it indicative of a better standard of living or what is the deal that it is the be all and end all?

Thu, 05/05/2011 - 08:07 | 1242400 Quintus
Quintus's picture

In a system where all money is borrowed into existance and must be repaid with interest, there is by definition never enough money in the world to repay all the Principal+Interest, i.e P < P+I

The only way this ponzi scheme can continue is by constant growth whereby an ever increasing quantity of new money is perpetually being borrowed into existance to enable the existing principal + Interest to be repaid.  

As soon as growth stops, debts cannot be repaid and the entire system collapses.

This is why we have an inflation 'Target' in all western countries.  Politicians and banker cannot keep prices stable and have zero inflation because then there would be no constant growth in the money supply.  It is also why Deflation cannot exist in our pure fiat systems.  If there is no inflation, the system collapses.  Deflation is not an option and that is why QE will continue forever OR the entire monetary system will simply collapse.

Thu, 05/05/2011 - 08:16 | 1242445 Hephasteus
Hephasteus's picture

-4 percent is a lie. Too many pants pissers to be true.

Too many weird ass scientific discoveries.

Too many battleship moments.

Too many bin laden killings and terrorism alerts that come from freezing and stealing money.

Thu, 05/05/2011 - 08:38 | 1242528 steve from virginia
steve from virginia's picture

China demand for German 'putz' has shrunk, reflecting diminished 'growth' (cancer) in China.

China is between 'rock' and 'hard place' with either continued hyperinflation or a property- driven deflationary crash. More inflation means more demand for F/X and increase in euro against the dollar/yuan. The process stifles German (car) exports while not enriching the Chinese a corresponding amount. (US currency traders make the money. Falling buck is money maker for F/X traders.)

W/O China there is no 'there, there' in Europe as most of the countries are essentially bankrupts with no domestic energy production but practically unlimited demand along with nothing to 'trade' for energy other than Deutchmarks (euros) they are able to borrow by way of finance ponzi schemes.

The EU/Trichet & Co. get down on their knees and pray to god for more hyperinflation in China, that PBOC continues to print and that the US QE/easing continues so as to support the only 'asset' the EU has to offer the world besides accelerated capital consumption (carz) ... the 'Euro'.

Trichet & Co. dare not beg Bernanke for more easing as he will refuse on the grounds that he was asked: the EU is in a vice. The F/X euro shorts are circling like hyenas (along with dollar longs who will make an absolute killing when Bernanke gives the EU the finger.) It's ging to get ugly, folks!

Meanwhile, the agony in the US is whether the PBOC will raise rates high enough to stifle hyperinflation? A 'hard landing' (as per Roubini) would trigger then next deleveraging event: for this would take place during a period of Fed support ...

The Fed would be swept away along w/ institutional support. Hang onto your hats ...

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