Back in April I told you that Germany was a “Dead Economy Walking.” Today, I get to tell you that it’s legs are gone.
Yesterday morning’s manufacturing PMI print was the worst news Angela Merkel could have imagined, 41.4. A figure so awful dogs will want to roll on it.
Overall, Germany’s economy at the purchasing manager’s level is contracting. And with Merkel masking a massive tax increase as a political cave to the rising Greens the future for Germany’s economic growth looks as bad as the following chart.
Aside from the obvious, the big takeaway from this chart is the consistency with which analysts who are paid a lot more than me over-estimate this number. It’s a brilliant depiction of confirmation bias.Recently:
And you can see why this happens. Conventional wisdom tells us that an accommodative central bank, and the ECB’s negative interest rates are the height of accommodation, should support continued manufacturing growth because credit is cheap.
But, it doesn’t if there’s no capacity for the buyers of German goods to take on more debt. Negative interest rates are supposed to increase currency flow because who wants to lose money on their savings, right?
Paging Larry Summers (you incompetent halfwit!) that’s not what they actually signal to the markets. They signal that things suck and the central bank has no confidence in the economy.
It should be no surprise to anyone that the ECB became dovish the minute they got the data that Germany’s economy was shrinking. Because without Germany expanding exports there can be no support for a stable euro, regardless of Brexit....
September 23
"Simply Awful": German PMI Plunges To 7-Year Low As Manufacturing Recession Accelerates, Spreads To Services
September 21
UPDATED—What Is Going On With Germany's Economy?
