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Tuesday, November 11, 2003

The State of Play in German Manufacturing

Brad has complained from time-to-time recently about the use and misuse of employment statistics in connection with the way they are presented in the media. Here I have found a peculiar example. I'm not sure I understand this article. Is German manufacturing really recovering or isn't it. Of course, hedging my bets as usual I'd say it is and it isn't. There seems to be an improvement, which would be normal after all the difficulties, but it isn't clear how far or how long this will last. The article seems more based on the expectation of improvement than on the reality: note that in September output fell 1.2% month on month.

German economic sentiment improved sharply in November, helped by rising stock markets and clear rises in manufacturing orders, the ZEW research institute said on Tuesday. The Mannheim-based institute said its economic expectations index, which is compiled from a survey of 300 analysts and institutional investors, rose to 67.2 from 60.3 in October, well above market expectations. ZEW said a significant rise in new orders, combined with rising equity markets and a weaker euro contributed to the increased optimism.

German orders rose by a bigger than expected 0.9 per cent in September, reinforcing signs that the eurozone's largest economy is finally on the mend after three consecutive quarters of contraction. But economists warned that disappointing output data for September, released last week, suggested Germany would see only modest growth in the third quarter of this year. Output fell 1.2 per cent month on month.

The ZEW index had been boosted by its expectations component and appeared to be overstating the growth trend in Germany, economists added. The survey's assessment of current conditions remained unchanged. The ZEW indicator is strongly driven by stock markets and is highly volatile. It fell slightly last month after recent strong rises. Nevertheless, economists said the index rise showed the Germany economy was finally climbing out of recession., and pointed to gradually accelerating growth. Most expect GDP growth of about 0.3% in the fourth quarter.
Source: Financial Times

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