So much for the hopes and dreams of German decoupling from the Eurozone's economic troubles. How things have changed in just six months (see this
discussion)! Germany's growth trajectory is now converging with the rest of the euro area's weakened economic conditions.
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| Source: JPMorgan |
JPMorgan: - At the country level, the PMIs continue to point to a
convergence in economic performance. Once again this
month, the PMI improved in France and also in the periphery,
whereas it slid further in Germany. At 47.0, the German
composite PMI is now barely above the Euro area average
and is pointing to a 0.5%q/q saar decline in GDP this quarter,
pending the arrival of official activity data (e.g., IP) to help us
fine-tune our estimate (+0.3%). This week’s 2Q GDP report
confirmed that German domestic demand has now been
stagnant for almost a year. The modest upward trend in
consumer spending remains in place, with higher wages
feeding through to gradually rising incomes. But, the
uncertainties of the sovereign crisis and weaker external
demand are manifested in reduced business capital spending,
which is offsetting the modest increases in consumer spending.
Notably, the German manufacturing PMI export orders index
slid to a strikingly low level of 39.5 this month.
At this stage it's only a matter of time before Germany's GDP (which is a lagging indicator) turns negative.
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| Source: Markit |
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