March’s 2.2% bounce in German industrial orders may be showing some early signs of light at the end of the tunnel. Economic spring might be arriving for Germany, but for much of the rest of the Eurozone, economic winter is still deeply entrenched. Export orders seem to be in the vanguard of recovery which suggests some tentative glimmers of hope that global demand for German capital and investment goods may be turning the corner to better recovery. It could also be a positive proxy signal for the global economy at large. What is encouraging is that German order books seem to be returning to their long term optimum output trend.
Eurozone policy makers should not delude themselves that they are out of the woods by any stretch of the imagination. Germany is a very different story to what is happening in the rest of the Eurozone. The Eurozone is still stuck in the jaws of recession, while the German economy seems to be gaining a firmer foothold thanks to the success of its export powerhouse. The debt crisis is still at the root of the Eurozone’s economic doldrums and much more policy balm still needs to be applied before the situation can be reversed and economic recovery can be guaranteed.
What will help are signs that the ECB are still ready to cut rates again to jump-start recovery, while some EU governments are ready to ditch tougher austerity in favour of more moderate fiscal policies. In the long run, only this will dictate whether Germany’s recovery can withstand the present headwinds and not succumb to a deeper economic maelstrom.
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