More from Wolf Richter:
The problem with orders is that they lead export-addicted German GDP: if orders drop, so does GDP, but with a quarter lag. And orders have taken a decided turn south.
That these comparisons to January 2009 are suddenly reappearing is unnerving: the first quarter that year, the economy fell off a cliff, with GDP plummeting 4.1% from the prior quarter. No German industrialist will ever forgot those months when orders and exports simply dried up.
For the rest, it was dreary: production of consumer goods fell by 0.4% and intermediate goods by 1.9%. Construction was down 2.0%. And production of capital goods, a critical indicator of business investment, plunged 8.8%.
All hopes are now on September. It would have to pull Germany out of its deepening malaise. It would have to be powerful. It would have to crank hard to prevent the economy in the third quarter from continuing its decline. But September already doesn’t look that hot. Markit’s Retail PMI, which surveys 400 retailers about month-to-month changes in retail sales, plummeted to 47.1 (below 50 = contraction), to the worst level since April 2010, unnervingly close to that terrible year of 2009.
And so in the third quarter, Germany’s economy might decline once again. It would be the second quarter in a row of declining GDP. It wouldn’t be an official recession (which takes other data points into account as well), but it would qualify as a technical recession. And then it would take a true Q4 miracle – of which there aren’t any on the horizon just yet – to pull out the year.
The question isn’t if German is a miracle economy – it does get some domestic policy right on the money, especially housing – it’s whether or not Europe can survive with it pushing the levers, dictating austerity for others and holding back the real structural changes.
Germany’s fall into recession territory may well be the catalyst the ECB needs to get real solutions on the table.