German Industrial Output and New Orders December 2007

German industrial output rebounded in December and increased at the fastest rate since August in December, led by durable consumer goods such as washing machines and flat-screen televisions.

According to data relased by the Economy Ministry in Berlin earlier today, output increased by a seasonally adjusted 0.8 percentin December from November, when it declined a revised 0.3 percent.




Today's report suggests some parts of German industry are weathering the euro's 11 percent gain against the dollar over the past year rather better than might have been expected, although today's exports numbers put a question mark over the strength of this process going forward.Overall, production of consumer goods rose 2.3 percent in December from November, the ministry said, with durable goods up 3.5 percent and output of non-durable goods increasing 2.1 percent. Investment goods production dropped 2 percent.

German plant and machinery orders rose 14 percent in December from a year earlier, fueled by sales abroad, the VDMA machine makers association said Jan. 6.
Other reports hawever have been showing a more mixed picture. The January services purchasing managers index incicated contraction, and retail sales fell sharply. Construction activity, which improved very slightly in December is still operating at very low levels.




German exports fell for a second month in December, and manufacturing orders dropped the most in five months, led by a drop in export sales, the ministry said yesterday, giving us another sign that Europe's largest economy is losing momentum.

Orders, adjusted for seasonal swings and inflation, fell 1.7 percent from November, when they rose 3 percent. This report, when combined with the November and December trade data suggests manufacturers are starting to feel the pinch of a surge in the euro that's making their exports less competitive abroad just as the U.S. economy hovers near recession. Chancellor Angela Merkel's government cut its 2008 growth forecast last month, citing a stronger euro and the increase in oil prices.

Germany Services PMI January 2008

Europe's service industries grew at the weakest pace in more than four years in January, as the possibility of a recession in the U.S. weighs on the European expansion. Royal Bank of Scotland Group Plc's services index dropped to 50.6, the lowest since July 2003, from 53.1 in December. A reading above 50 indicates growth.

The slowdown presents a real headache for the view of European Central Bank that the euro region is strong enough to cope with a cooling U.S. economy and that inflation concerns prevents them from following the Federal Reserve into monetary easing. In the U.S., which is the second biggest destination for euro-area exports, the Fed eased monetary policy by the most since 1990 last month, to bolster the economy.



The euro fell as much as 1.1 percent to $1.4671 and traded at $1.4683 at 11:32 in Frankfurt. The Dow Jones 600 Stoxx index extended declines after today's figures, falling as low as 326.33 from 329.13 yesterday.

The national indexes fell across the board with Germany's service industry slumping below the 50 threshold for the first time in 4 1/2 years and Spain's service sector shrinking the most since the survey began in 1999. A composite measure for the euro region fell to 51.8 from 52.7 the previous month, according to the report, which is based on a survey of purchasing managers by NTC Economics.

The purchasing managers index for Germany's services sector fell to 49.2 in January, indicating that the sector has entered a period of contraction, market sources said Tuesday. That compares with a reading of 51.2 in December.


The Italian services index fell to a seasonally adjusted 47.9 in January from 49.7 in December, reaching the lowest level since May 2005.

The International Monetary Fund last week cut its euro-region growth estimate by half a point to 1.6 percent, saying the turmoil in financial markets has spread to the rest of the economy. The IMF now expects the global economy to expand 4.1 percent this year, below the 4.4 percent pace projected in October.

German Retail sales PMI January 2007

German retail sales appear to have contracted again in January, according to the latest reading on the the Bloomberg purchasing managers index.

European retail sales fell for a fourth month in January as rising fuel, utility and food prices left shoppers with less money to spend, the Bloomberg purchasing managers index showed. The gauge of sales in the euro region was a seasonally adjusted 48.1, compared with 46 in December. A reading below 50 indicates a decline. The index is based on a survey of more than 1,000 executives compiled for Bloomberg News by NTC Economics Ltd.


In Germany, Europe's largest economy, the index also showed a decline, registering 44.2 after giving a reading of 44 in December.



Italian sales dropped to 43 from 44.7, the biggest monthly decline since the survey began four years ago.In France, on the other hand, the index rose to 56.2 from 49.1. What this actually means in practice remains to be seen. Italy already seems to be in recesion at a good first aproximation guess, and Germany appears to be on the threshold. What is not clear is where exactly France is in the process at this part of time. On the surface she appears to be showing more resilience, but the proof of the pudding will most definitely be in the eating thereof.