Germany in Recession: Private Sector Sees Fastest Falls in Output and New Business Since June 2009; New Export Orders Collapse

The vaunted German export machine is sinking into the abyss. The Markit Flash Germany PMI® shows German private sector sees fastest falls in output and new business since June 2009.

Key Points

• Flash Germany Composite Output Index(1) at 47.3 (48.1 in June), 37-month low. 
• Flash Germany Services Activity Index(2) at 49.7 (49.9 in June), 10-month low. 
• Flash Germany Manufacturing PMI(3) at 43.3 (45.0 in June), 37-month low. 
• Flash Germany Manufacturing Output Index(4) at 42.8 (44.8 in June), 37-month low.

Summary:

The seasonally adjusted Markit Flash Germany Composite Output Index fell for the sixth month running in July, to 47.3 from 48.1 in June. The index has posted below the 50.0 no-change value in each month since May, and the latest reading signalled the fastest pace of private sector contraction since June 2009.

Manufacturers suffered a sharper drop in business activity than service providers during July, as well as a greater loss of momentum relative to the situation in June. The latest reduction in manufacturing production was the steepest for just over three years, while new orders received in the sector dropped at the fastest pace since April 2009. Service providers recorded only a marginal decrease in business activity, although the rate of contraction was the joint-fastest in three years.

Across the private sector as a whole, new business intakes fell at the quickest rate since June 2009, with manufacturers and service providers both recording much sharper declines than during the previous month. Lower levels of new work have been recorded in the service economy during each month since April, and the latest reduction was the fastest for exactly three years. Meanwhile, in the manufacturing sector, new export orders declined at the steepest rate since May 2009, which contributed to a thirteenth successive monthly fall in total new business volumes.

July data pointed to a sharp and accelerated fall in outstanding business across the German private sector. ....

Flashback January 09, 2012: Dimwit Comment of the Day: Christine Lagarde, IMF Director says "Europe May Avoid a Recession This Year"

In what is likely the silliest comment of the year so far, Christine Lagarde says Europe may avoid recession this year

Flashback January 12, 2012: German Economy Contracts in 4th Quarter; Spain's Industrial Output Plunges 7%; UK Trade Deficit Widens; European Banks Wisely Hoard Cash

If Europe heads into a prolonged recession (and it has already started), Germany cannot help but get sucked into it. Approximately 28 percent of German GDP is derived by exporting goods to EU countries and Switzerland.

Think German exports to the rest of Europe are going to rise forever? Think again, starting with a look at the Eurozone's 4th largest economy. ...

Flashback February 23, 2012: Don't Worry, It's Only a "Mild Recession"

The economic clowns in the EU have finally acknowledged something that was blatantly obvious at least six months ago (and a lot longer if one factored in the likely effects of multiple austerity programs in numerous countries).

However, the economists' new conclusion is about as silly as the "no recession" call that preceded it. The new forecast: there will be a recession in the eurozone but not the EU and it will be "mild".

Such nonsense went on for months actually. Economists were behind the curve every step of the way even though it should have been blatantly obvious what was about to happen.

Global Recession Revisited

On July 6 I wrote Plunging New Orders Suggest Global Recession Has Arrived

Clearly I am not changing that prognosis although I do wish to reiterate the definition of "global recession as per my post Case for US and Global Recession Right Here, Right Now; Recognizing the Limits of Madness; Permabears?

Contrary to popular myth, recession does not mean two consecutive quarters of economic contraction. Rather, two consecutive quarters of economic contraction is a sufficient, but not necessary condition.

In the US, the NBER is the official designator of recession start and end points. Many recessions have started with GDP still growing.

The "Conditions for Global Recession" are even looser. "The International Monetary Fund (IMF) considers a global recession as a period where gross domestic product (GDP) growth is at 3% or less. In addition to that, the IMF looks at declines in real per-capita world GDP along with several global macroeconomic factors before confirming a global recession."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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