Encouraging data from Germany

Signs of relief. This morning’s German data provides some relief and signs of stabilization of the economy in the final quarter of the year. Particularly the surprise increase of new orders in November bodes well for the coming months. After a disappointing summer performance, German new orders increased for the second month in a row, now by 1.5% MoM in November, from 1.7% MoM in October. For the pessimists, the increase in new orders was mainly driven by domestic demand (2.6%). This shift of the German economy towards more domestic activity is probably the theme of 2015. On the year, domestic new orders are now up by more than 6%, while foreign orders are down by 0.7%. Moreover, this morning’s retail sales data supports strengthened domestic demand, showing an increase of 0.2% MoM in November. On the year, retail sales are up by 2.3%. This morning’s data has at least two important messages for and on the German economy: i) there is still hope that hard industrial data will eventually catch up with strong soft data (and the other way around); and ii) with record low inflation, record high employment, record low unemployment, strong consumption and the surge in domestic orders, the year 2015 marks the successful transition towards more balanced growth.