"Germany is now going into recession. Manufacturing is too low, and the bad construction PMI means that no internal forces can keep the services sector up.
A relatively minor downshift in the auto production trajectory is showing up pretty strongly as an economic negative (see CFNAI). But this was minor. If car sales fall a bit more, things get rough quickly.
Over the last few months, we have followed a very similar trajectory to 2011, and the reason is somewhat similar. Autos. Auto production. See Philly Fed.
The cause, however, is quite different and should give everyone pause. Extremely easy credit has been sustaining car sales, in part because used-car prices were so high that they sustained bad loans because bad loan losses were very limited. This may have worn itself out based on auto advertising I am hearing. If so, then we are in for a sustained deceleration in sales and auto production will shift toward a minor negative in the next few months.Last month's downward sales surprise hinted at this.
If that does happen, then all the negatives, which include external and internal factors (Euro tragedy and global deceleration, the domestic erosion of real incomes due to inflation, political uncertainty causing caution in business spending) start to pull us steadily down. Even if car sales stay up for the next few months, we probably will see some tax increases next year and therefore will go into frank recession then. "
Tuesday, June 26, 2012
Global slowdown in progress
MaxedOutMama documents it nicely: Die Euroliebe Ist Ein Wildes Tier