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German(E) Data -May 10, 2012

 May 10, 2012 01:37 PM


While the PIIGS have again dominated headlines over the last week, Germany's quietly notched a smattering of positive data. German retail sales rose 0.8% month over month in March, rebounding from a downwardly revised -0.9% m/m contraction in February. Factory orders rose 2.2% m/m in March from a 0.6% m/m increase in February. Analysts had expected only a 0.5% increase. Tuesday, German industrial production rose a seasonally adjusted 2.8% m/m, versus expectations for a 0.8% m/m increase. And Wednesday, German exports rose 0.9% m/m—the third consecutive monthly increase. Imports also increased—1.2% m/m. Both imports and exports notched all-time highs in Germany.

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In a vacuum, such data hardly seem to paint a picture of a country on the brink. Though that's been a concern for some time now—that Germany, while certainly strong relative to the rest of the eurozone, would ultimately succumb and follow into recession. Germany's Q4 2011 GDP contracted -0.2% q/q, so if the country were to notch another negative number in Q1, it would (by a commonly cited definition) enter technical recession territory. And sure, that's possible, though it's just hard to imagine German GDP contracting too significantly in Q1 when so many data points are logging growth and even acceleration. Even if Germany does technically enter a recession, it's similarly hard to believe it will contract much more severely than it did in Q4—meaning a recession could be short-lived and rather shallow.

Which likely leads many to wonder what Germany's status implies for the eurozone and Europe as a whole. To be sure, relative resilience in Germany is no all-clear sign—either for Germany itself or for broader Europe. But it would seemingly argue to an extent against the likelihood of an imminent, disastrous European implosion.


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