Earlier today we got another indication that Europe's recession will hardly be a "technical" or "transitory" or whatever it is that local spin doctors call it, after the European December Industrial Output declined by 1.1% led by a whopping 2.7% drop by European growth dynamo Germany, which slid by 2.7% compared to November (which in turn was a 0.3% decline). This was worse than the Greek number which saw a 2.4% drop, however starting at zero somewhat limits one's downside. Yet even as the German economic decline accelerated, German ZEW investor expectations, which just like all of America's own consumer "CONfidence" metrics are driven primarily off the stock market, which in turn is a function of investor myopia to focus only on nominal numbers and not purchasing power loss - a fact well known to central bankers everywhere - do not indicate much if anything about the economy, and all about how people view the DAX stock index, which courtesy of the ECB's massive balance sheet expansion, has been going up. And if there has been any light at all in an otherwise dreary European tunnel, it has been the dropping EURUSD, which however has since resumed climbing, and with it making German industrial exports once again problematic. Which in turn brings us back to the primary these of this whole charade: that Germany needs controlled chaos to keep the EURUSD low - the last thing Merkel needs is a fixed Europe. It is surprising how few comprehend this.
Some more from Bloomberg:
Production in the 17-nation euro area fell 1.1 percent from November, when it remained unchanged, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 1.2 percent, the median of 36 estimates in a Bloomberg News survey showed. From a year earlier, production decreased 2 percent.
The region’s economy probably failed to grow in the fourth quarter as governments toughened austerity measures, undermining spending and hiring, just as global exports weakened. While industrial orders dropped in November and unemployment held at the highest in more than a decade in December, European Central Bank President Mario Draghi said on Feb. 9 that he sees “tentative signs” of economic stabilization.
“The euro-region economy probably slipped into contraction in the fourth quarter of 2011 and may continue to shrink through the first half of 2012,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “The fiscal crisis still has the potential to hurt the economy and there are enormous risks.”
Gross domestic product probably dropped 0.4 percent in the three months through December after rising just 0.1 percent in the previous three months, according to the median estimate of economists in a Bloomberg survey. That would be the region’s first quarterly contraction in 2 1/2 years. The statistics office will release the GDP figures tomorrow.
Already rising unemployment has only one direction to go:
With economies cooling across the region and export orders weakening, companies have been forced to lower costs to help protect earnings. Employers around the globe are cutting jobs more than three times faster than in 2011, Bloomberg data show.
Capital goods slide
Output of capital goods in the euro region fell 0.8 percent from November, when it rose 0.2 percent, today’s report showed. Production of durable consumer goods rose 0.2 percent and energy output fell 2 percent. Production of intermediate goods fell 0.7 percent.
Siemens AG, Europe’s largest engineering company, on Jan. 24 reported earnings that missed estimates as profitability dropped at its four main units, and predicted that Europe will slip into recession in the coming months.
“The uncertainties of the ongoing debt crisis have left their mark on the real economy,” Siemens Chief Executive Officer Peter Loescher said on that day. “Although a recovery is expected in the second half of the year, we must work hard to achieve our goals.”
Luckily, there's the economy, and then there is the ECB, which at this point has come to a backdoor agreement with Germany that as long as it does not monetize "strongly" or at least pretend to accept worthless collateral in exchange for trillions in cash, all shall be well - this is a development which the Fed is observing very cautiously, and following recent moves by the BOE, BOJ and ongoing easing by the ECB, will hardly stay pat as the rest of the world takes the lead in the global currency debasement race.