It turns out that the global manufacturing export slowdown is not restricted to China. The German Federal Statistical Office (Destatis) reports that the country’s exporters had a difficult December:
Domestic turnover decreased by 2.1%, the business with foreign customers fell 2.4%. Sales to euro area countries were 4.2% below the preceding month’s level, while sales to other countries dropped 1.0%.
The figures are particularly troubling because the decline was not restricted to transactions with other countries in the region. Large importers like the U.S. and China probably contributed to the problem. If so, it is a sign that the turnaround in the global economy is inconsistent. Concerns about that have been voiced recently. The International Monetary Fund lowered its GDP growth forecasts for every large nation other than the U.S. The agency also warned that China’s GDP growth, currently predicted to be up by 8% this year, could be half of that if trouble in Europe worsens.
The worry about Europe has begun to tilt a bit away from the sovereign debt crisis and toward concerns that the entire area may be at the start of another recession. These issues are, of course, linked. Austerity is the antidote to the debt crisis, at least in the minds of the leaders of Germany, the region’s de facto banker. But experts believe that austerity will quickly choke growth and deficits will rise despite cost cuts because a downturn will compromise tax bases. The German export numbers show that the shock to the region’s nations has begun already. That point of view is bolstered by recent unemployment numbers for most of Europe’s countries.
It is ironic that Germany may be crippling its own economy. Its insistence on budget cuts in Spain, Italy, Portugal and Greece will quickly undermine the ability of their citizens and businesses to be even modest consumers of imports. Germany will have gotten what it wants in budget cuts, but its own businesses will be much the poorer.
Douglas A. McIntyre
Top Gaining Stocks
Top Losing Stocks