Yesterday it was German manufacturing orders which cratered 5.7% in August following a freak, 4.9% rebound in July, prompting Goldman to warn that "the underlying dynamic has weakened further at the end of Q3" ...
[8]
... And then a few hours ago we finally got undeniable confirmation that Europe is once again in recession, its third since Lehman, only this one is worse: it is led by the "core" countries, with Germany in the forefront, a Germany which just reported industrial output which suffered its biggest monthly decline in more than five years in August. Specifically, German IP tumbled 4%, led by capital goods which crashed 8.8%; consumer goods sliding 0.4%, and basic goods dropping 1.9%, with the headline plunge far below the consensus of -1.5%, and below even the worst forecast of -3.0%, the biggest drop since February 2009, a result which according to the FT rose "fears that Europe’s biggest economy might be heading for recession and prompting renewed concern about the economic health of the eurozone."
Oh, don't be afraid: the world's largest economic block is now without doubt in a triple-dip recession, which will in turn drag both the US and China down with it.
From the FT [9]:
Output plunged 4.0 per cent from July, data published on Tuesday show, far more than the average 1.5 per cent drop forecast by economists and the largest decrease since February 2009, when the global financial crisis first hit Europe’s factories.
Coming on top of poor August data for industrial orders earlier this week, the numbers indicate that Germany is starting to suffer from a global weakening in demand for its exports due to geopolitical upheavals and slower growth in China.
With the figures influenced by plants closing for later than usual summer holidays, economists hedged their bets about the outlook for the rest of the year.
But they are no longer ruling out Germany falling into recession – with a possible decline in gross domestic product coming in the third quarter on top of the 0.2 per cent drop recorded in the three months to June.
Carsten Brzeski of ING bank wrote that a strong labour market and robust domestic consumption should “at least partly” offset weaker industrial output. “Whether this will be enough to avoid a technical recession, ie another contraction in the third quarter, is with today’s industrial production numbers too early to tell.”
Ralph Solveen, economist at Commerzbank, took a more optimistic view, saying that the late timing of summer holidays was “key”. But he too now expects GDP to fall growth to fall towards zero. “The trend is pointing down, with the German economy in the third quarter likely to have stagnated at best.”
And finally from Goldman: "Bottom line: Industrial production declined sharply in August partly owing to seasonal factors. The underlying trend, however, is also pointing downwards."
Well, at least the Eurozone, and the artificial "political capital" currency was bailed out at all costs, and since the "chairman got to work" nobody else had to, and thus there was zero reform in any of Europe's broken economies. Enjoy your hard-earned, and third in the past 6 years recession, Europe. Don't worry though, the rest of the world is coming right behind you.
