Sound bites: German orders trend shows continuing recovery

Despite July’s 2.7% dip in German orders, the underlying trend remains strong and shows the German recovery gathering greater vigour. Given the 5% orders surge in June, the July correction is no surprise. Domestic demand is springing back and the export sector remains on track for continuing good growth. The economy is coming back onto its long term output growth potential. Given this backdrop it is no wonder there is a growing chorus amongst German officials for an end to the ECB’s super-easy interest rate policy. The call is going to fall on deaf ears as the economies outside Germany remain in a sorry state and still pose a heavy millstone around Germany’s neck. The ECB will stay the course on over-easy monetary policy until 2015 at least. If the ECB were to adopt a formal forward guidance policy on rates based on the Eurozone’s 12.1% unemployment rate, monetary policy could stay super-easy for a lot longer than 2015.