Germany is definitely on the ropes
The FT reports:
The eurozone economy has shown fresh signs of spluttering, with German industrial production dropping unexpectedly sharply in May – the strongest monthly fall since August 1997.
–FT, 7 Jul 2008
This is the latest sign in a string of reports that point to a deepening slowdown in the heart of Europe. Just this past Friday factory orders came in below expectations (see story). Moreover, retail sales have been falling and wage conflict rising as inflation takes its toll on the German economy.
Given how buoyant Germany had been in 2007, one must conclude that the downturn in German fortunes are an outgrowth of the credit crisis and contagion from the U.S. in particular.
As the slowdown in the U.S. started, many pundits wondered allowed whether the world could de-couple from the U.S. this time, and continue to grow at or above trend. As far as Germany is concerned, we have the answer: no.