Daily commentary: On negative German data surprises

By Edward Harrison On Apr 23, 2012

I have been saying that I expect German data to disappoint and come in on the softer side. Why? German Ifo numbers suggest improving business confidence even though German data has been relatively weak.

For example, German retail sales for February were weak as were the German PMI numbers. Germany printed 48.4 which is below the expansion divide. Just today, we got further confirmation of the weakness in the data with German manufacturing shrinking at the largest pace since 2009. Either the German businessmen know something that we don’t or their confidence is completely misguided. I am betting it is more the latter than the former. And so while I think German numbers will hold up well compared to the rest of the euro zone, they will come in below expectations.

After all, I did say in January that Germany is in recession already with the rest of the euro zone, meaning that Q1 2012 will be a negative GDP print. I think this is an outlier perspective but we will see the numbers in due course and I think they will be weak, probably negative.

Bottom line: The Germans will do relatively well but they will not decouple. If the eurozone slides down, Germany will undoubtedly slide with it.

That’s it. Here are the links.