Photo: Ed Yardeni
Companies around the world have the opportunity to find more customers all around the world. They are no longer limited to doing most of their business in so-called “advanced” economies when so many emerging economies offer faster growth and potentially even more customers. This is especially important now that the advanced economies, especially in Europe, are struggling to grow because their governments have borrowed so much to support their bloated social welfare states.
Yesterday morning, we had a very good example of how this is working for German manufacturers when their orders indexes for March were released. The overall index rose 2.2% m/m. This increase was led by a 3.0% increase in foreign orders. Foreign orders within the euro area peaked last year during June and are down sharply by 21.3% since then. Foreign orders outside of the euro area have held up near recent cyclical highs over the same period, and rose 13.9% over the past four months through March.
This morning we learn that German production jumped 2.8% during March. February’s number was revised to a decline of 0.3% from a drop of 1.3%. While the European debt crisis is dampening demand for German products in Europe, there is still plenty of demand for them in places like Russia, China, India, Brazil, and South Africa. Bloomberg notes this morning: “With unemployment at the lowest level since reunification, German workers are securing some of the biggest wage increases in two decades. By contrast, joblessness in the 17-nation euro region rose to a 15-year high in March and manufacturing contracted for a ninth month, adding to signs the economic slump is deepening.” Can Germany’s economy decouple from the weakness in the rest of the euro area? So far, so good.