Wednesday, November 14, 2012

The crisis-denier - German GDP up 0.2% QoQ in 3Q

The crisis-denier. According to a first estimate of the statistical office, the German economy once again defied all swan songs. Eurozone's biggest economy grew by 0.2% QoQ in the third quarter, from 0.3% in 2Q 2012. On the year, German GDP was up by 0.9%. Combined with stronger-than-expected French GDP growth (+0.2% QoQ in 3Q), chances have increased that Eurozone GDP growth (released at 11am CET) could be better than our forecast of -0.3% QoQ.

The decomposition of German growth will only be released at the end of the next week but according to the press statement of the German statistical office and available monthly data, consumption and net exports were the main growth drivers. The sharp drop of all confidence indicators since late-Spring has not yet been translated into a contraction of the economy. In fact, the real economy proves to be more resilient than expected. The strong labour market, wage increases but above all the good old friend exports are the main drivers of sustained resilience.

Looking ahead, however, at least the near term outlook for the German economy looks anything but rosy. It is hard to believe that the current decoupling of soft and hard data can last much longer. To be more precise, rapidly thinned out order books do not bode well for industrial production in the coming months. The negative industrial production reading in September gave already a bitter foretaste of worse things to come.

Looking beyond the near term, however, shows a somewhat more positive picture. Also in 2013, the German economy should once again be spared from the recessionary mix of structural reforms and austerity measures. Moreover, even if domestic demand should lose some steam due to a weaker labour market, the risk for the economy of falling off the cliff looks very limited. To the contrary, the creeping decoupling from the rest of the Eurozone – only 1/3 of German exports currently go to Eurozone peers – enables the economy to benefit quickly from any rebound of the global economy.

Today’s numbers have some similarities with Germany’s national soccer team. Even if the performance forbids any enthusiasm, it is still sufficient to keep the rest of the Eurozone in check…

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