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Archive for the 'GDP' Category

retail sales charts

Posted by WARREN MOSLER on 14th April 2014

Headline retail sales y/y with 3 mma:

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3 month moving average nudged up to 2.5% which is a relished move as sales catch up from losses due to weather. But it’s going to take more months like this one to reverse what looks like a longer term trend towards lower levels.

Note however that Red Book and Goldman retail sales reports, though ‘minor’ indicators, haven’t shown much strength.

You can see the dip and recovery of the monthly prints on this graph:

Posted in GDP | No Comments »

wholesale sales and inventories

Posted by WARREN MOSLER on 10th April 2014

Just noticed wholesale sales didn’t bounce much yet either. The Hope now is for gradual improvement

Wholesale inventories 0.5% in February a slower pace in February than in the 0.8% gain the prior month, which could support views that restocking will not help the economy in the first quarter. Wholesale Sales rebounded 0.7% in February after a 1.8% decline in January.

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consumer credit and a few comments

Posted by WARREN MOSLER on 8th April 2014

Note the year over year rate of growth:

As previously discussed, in order for GDP to grow at last year’s pace all the pieces, ‘on average’ have to do same.

And so far, housing and cars are well below last year’s growth rates.

And the contribution of net govt spending is well below last year’s contribution.

And so far net export growth isn’t coming to the rescue.

Nor is consumer credit driving spending.

Even capex just took a hit.

And the personal income growth rate isn’t looking like it’s ‘bounced’ any.

Employment growth, a lagging indicator that’s largely a function of sales, if anything looks a tad less as well.

The ‘surveys’ are still showing positive growth, and maybe they’ll turn out to be correct. But I have noticed a tendency for their responses to be influenced by the stock market.

Hopefully we’ve just had a weather pause, and the consumer and business celebrate spring with a material surge of spending that exceeds their incomes to off set the ongoing ‘demand leakages’.

But if not, growth slips into reverse until the federal deficit again gets large enough to stop the slide.

Posted in Credit, Employment, GDP, Government Spending | No Comments »

Economy Knocking At Recession’s Door

Posted by WARREN MOSLER on 6th April 2014

See charts
Must be reading my blog

Economy Knocking At Recession’s Door

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Charts from the last few days

Posted by WARREN MOSLER on 3rd April 2014

Total vehicle sales year over year showed some post winter bounce.

The narrative was that March started off slow but picked up due to large incentives for the last week.

We’ll see if it all holds up for April.

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Factory orders ‘bounced’ from large declines but not yet enough to ‘make up’ for the declines.

And regarding capital goods, as with construction measures, I remain concerned that what looked like a year end spike was tax driven and ‘borrowed’ from this year.

Factory orders bounced back strongly in February, up 1.6 percent to edge above the high end of the Econoday consensus. The month got a major lift from a 13.4 percent upswing in commercial aircraft orders. A 3.0 percent gain in motor vehicle orders also helped the total. But the total excluding transportation orders, which is a closely tracked reading, is also healthy, up 0.7 percent following 0.1 percent declines in the prior two months.

There is, however, a negative in the February numbers and that’s a sizable 1.4 percent decline in nondefense capital goods orders excluding aircraft. This is considered a core reading on the outlook for business investment. February’s decline more than reverses a 0.8 percent rise in January. Orders for this reading were especially weak in December, at minus 1.6 percent.

Other data include a weather-related bounce in shipments, to plus 0.9 percent following January’s 0.7 percent decline. Inventories rose 0.7 percent, in line with shipments and keeping the factory sector’s inventory-to-shipment ratio unchanged at 1.30. Unfilled orders are a positive, up 0.3 percent.

This report is mostly positive if it weren’t the decline underway in core capital goods orders, a decline that points to weakness in the business outlook. Early indications on the manufacturing for March have also been mostly positive, with the exception of yesterday’s slowing in the ISM employment index.

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Global manufacturing has softened in recent months. At 52.4 in March, down from 53.2 in February, the J.P.Morgan Global Manufacturing PMI fell to a five-month low, but remained above its average for the current 16-month sequence of expansion.

Global manufacturing production increased for the seventeenth consecutive month in March. However, the rate of expansion eased to a five-month low, mainly on the back of a slowdown in Asia. Growth of total new orders also eased slightly, despite improved inflows of new export business.

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Employment, generally a lagging indicator, was up some, but the chart still seems ‘uninspiring’ at best:

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Not to give this all that much weight, and they are limited surveys with Easter distortions as well, but the year over year lines aren’t showing any rebound yet:

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Purchase Mortgage applications up 1% for the week but down 19% vs last year.

What I’m saying is that Jan and Fed were weather depressed. And with the federal deficit now running maybe below 3% of GDP, down several % from last year, some pro active and some from the auto stabilizers, my concern is that the underlying support for a bounce is no longer there and the rate of growth continues to decelerate. Yes, lending is up some, but it could be the financing of utility bills and inventory/reduced cash flow growth, which takes away from future sales.

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Mtg purchase apps, New Home Sales, Durable goods orders still not performing

Posted by WARREN MOSLER on 26th March 2014

MBA Purchase Applications

Purchase applications rose 3.0 percent in the March 21 week but failed to lift the year-on-year rate which is down a very sharp 17.0 percent. The year-on-year rate is a reminder of how important cash buyers are right now in the housing market and also a reminder that mortgage rates this year are less favorable than this time last year. The refinance index fell 8.0 percent in the week. Rates rose in the week with the average 30-year mortgage for conforming loans ($417,500 or less) up 6 basis points to 4.56 percent.

Durable Goods Orders

The latest durables orders report was mixed with the headline strong and the core slowing. New factory orders for durables in February rebounded 2.2 percent, following a decrease of 1.3 percent in January. Analysts projected a 1.0 percent rise. Excluding transportation, durables orders slowed to a 0.2 percent rise in February, following a 0.9 percent boost the prior month.

The transportation component jumped a monthly 6.9 percent after dropping 6.2 percent the month before. Within transportation, the gain was led by increases in orders for defense aircraft although nondefense aircraft and motor vehicles also were strong.

Outside of transportation, orders were up slightly but very mixed by subcomponents. Gains were seen in primary metals, fabricated metals, computers & electronics, and “other.” Notably offsetting were declines in machinery and electrical equipment.

There was slippage in investment plans. Nondefense capital goods orders excluding aircraft decreased 1.3 percent in February, following a rebound of 0.8 percent the month before. Shipments for this series advanced 0.5 percent, following a 1.4 percent drop in January.

The latest durables report suggests that manufacturing is not as strong as indicated by recent manufacturing surveys.

Note the year over year line:

From yesterday, the charts looks like sales were rising nicely before being flattened by the tax hikes and spending cuts:

Still too early to tell, but so far charts aren’t showing much of a ‘bounce’ from the weather yet.

Posted in Economic Releases, GDP, Housing | No Comments »

Wholesale trade

Posted by WARREN MOSLER on 11th March 2014

Worse than expected, and only one number subject to revision, with the govt deficit at only 3% of GDP this kind of slowdown can turn pro cyclical:

Wholesale Trade

Rising inventories, tied in part to weather-related shipping snags, are a rising threat to economic growth. Wholesale inventories rose 0.6 percent in January against a 1.9 percent plunge in sales, a heavy mismatch that drives the sector’s stock-to-sales ratio up 2 notches to 1.20 which is one of the heaviest readings of the recovery.

Details show large builds in autos, metals, and machinery, three groups where January sales were weak. Nondurable goods show especially large builds against especially soft sales including paper, drugs and petroleum.

Data on factory inventories, which were released last week with the factory orders report, showed an unwanted build and a dip in sales that pushed the stock-to-sales ratio near its heaviest level of the whole recovery. Inventories in the retail sector, with December the latest available report, are the heaviest of the recovery and are building at a time when sales are slowing — not accelerating. Retail data for January will be posted with the business inventories report on Thursday.

Market Consensus before announcement
Wholesale inventories showed a 0.3 percent build in December and were well matched by a 0.5 percent rise in wholesale sales that left the stock-to-sales ratio for the wholesale sector unchanged at 1.17. This ratio has held between 1.18 and 1.17 since May.

Posted in GDP, Government Spending | No Comments »

Factory orders- another Dec print revised down

Posted by WARREN MOSLER on 6th March 2014

Frigid weather in January didn’t help the factory sector where orders fell 0.7 percent following a downwardly revised 2.0 percent decline in December. Also revised lower is the ex-transportation reading for January, to a slim plus 0.2 percent vs an initial reading (in last week’s durable goods report) of plus 1.1 percent. Non-durables are the new data in today’s report which show a 0.4 percent decline on weakness in chemical products.

Orders for primary metals show a third month of contraction, at minus 1.2 percent in January, with transportation equipment a second month of contraction, at minus 5.7 percent vs a 12.1 percent plunge in December. The bulk of the weakness in transportation is tied to the ups and down of commercial aircraft orders but also to motor vehicles, where orders fell 0.9 percent following December’s 1.2 percent decline. Machinery also shows a decline in January along with electrical equipment and furniture, the latter two of which are tied to housing. The plus side shows a big gain for fabricated metals, one however that follows a big loss in December, and a gain for computer equipment that doesn’t offset a much larger December decline.

Shipments fell 0.3 percent for a second month in a row while inventories rose 0.2 percent, a moderate build but enough, given the weakness in shipments, to raise the inventory-to-shipments ratio one notch to the heavy side to 1.30. Unfilled orders were unchanged in the month.

There is a positive in the report and that’s capital goods orders excluding aircraft, a core reading on business investment that rose 1.5 percent. Still, the gain isn’t enough to offset a 1.6 percent decline for this reading in the prior month.

Factory orders are a choppy series, sometimes up and sometimes down, but the trendline has been flat at best. Anecdotal indications on February point to another month of weakness for shipments, weakness tied to heavy weather, but, in what hopefully points to a bounce back for the spring, respectable strength for orders.

Chart looks like the weather turned bad in May:

Lots of talk about ‘wage inflation’ but not showing up for real so far:

Productivity in the fourth quarter rose a revised1.8 percent after a 3.5 percent boost the prior quarter. Expectations were for 2.4 percent increase. Unit labor costs declined an annualized 0.1 percent, following a decrease of 2.1 percent in the third quarter. The market forecast was for a 0.5 percent decline.

The rise in productivity reflected a 3.4 percent jump in non-farm output, following a boost of 5.4 percent in the third quarter. Hours worked increased 1.6 percent in the fourth after rising an annualized 1.9 in the third quarter. Compensation firmed to a 1.7 percent rate after rising 1.3 percent in the third quarter.

Year-on-year, productivity was up 1.3 percent in the fourth quarter versus up 0.5 percent in the third quarter. Year-ago unit labor costs were down 0.9 percent, compared to up 1.9 percent in the third quarter.

Posted in GDP, Inflation | No Comments »

ADP, purchase apps, ISM

Posted by WARREN MOSLER on 5th March 2014

Prior months revised down as well:


MBA Purchase Applications:

Wild swings appear to be the rule for weekly mortgage application data. The purchase index jumped 9.0 percent in the February 28 week following declines of 4.0 percent and 6.0 percent in the two prior weeks. Though the latest week is higher, the year-on-year rate fell 4.0 percentage points to minus 19 percent. The refinance index jumped 10.0 percent in the week following an 11.0 percent decline in the prior week.

The latest week got a lift from a drop in mortgage rates, down 6 basis points for 30-year conforming mortgages ($417,500) to an average 4.47 percent.

It’s hard to make much of this report, but the year-on-year rate for purchase applications does point to continued weakness for home sales.

In particular, there was a significant drop in the employment index, which plunged 8.9 points to 47.5. This is its lowest level since 2010 and commentary from respondents suggests that some of this effect could be due to the implementation of the Affordable Care Act.

Outside of the employment index, however, the new orders index climbed to 51.3 (previous: 50.9), and the headline index has now remained above the breakeven level of 50 for 49 consecutive months. Overall we would suggest that this is a softer report than January, but we do not yet think that it marks a significant slowdown in the pace of nonmanufacturing activity growth.

Note export orders down again.

Forecasters have been counting on an increase in export growth:

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Lawler on Hovnanian: Net Home Orders Far Short of Expectations; Sales Incentives Coming

By Bill McBride

March 5 — From housing economist Tom Lawler:

Hovnanian Enterprises, the nations sixth largest home builder in 2012, reported that net home orders (including unconsolidated joint ventures) in the quarter ended January 31, 2014 totaled 1,202, down 10.6% from the comparable quarter of 2013. The companys sales cancellation rate, expressed as a % of gross orders, was 18% last quarter, up from 17% a year ago. Home deliveries last quarter totaled 1,138, down 4.2% from the comparable quarter of 2013, at an average sales price of $351,279, up 6.1% from a year ago. The companys order backlog at the end of January was 2,438, up 6.0% from last January, at an average order price of $368,243, up 4.3% from a year ago.

Hovnanians net orders in California plunged by 43.4% compared to a year ago. Hovnanians average net order price in California last quarter was $653,366, up 46.8% from a year ago and up 83.2% from two years ago. Net orders in the Southwest were down 10.0% YOY.

Here is an excerpt from the companys press release.

“While our first quarter is always the slowest seasonal period for net contracts, the strong recovery trajectory from the spring selling season of 2013 has softened on a year-over-year basis. Net contracts in the months of December, January and February have not met our expectations. In addition to the lull in sales momentum, both sales and deliveries were impacted by poor weather conditions and deliveries were further impacted by shortages in labor and certain materials in some markets that have extended cycle times,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer.

“We are encouraged by the fact that we have a higher contract backlog, gross margin and community count than we did at the same point in time last year. Furthermore, we have taken steps to spur additional sales in the spring selling season, including the launch of Big Deal Days, a national sales campaign during the month of March. Our first quarter has always been the slowest seasonal period and we expect to report stronger results as the year progresses. We believe this is a temporary pause in the industry’s recovery, and based on the level of housing starts across the country, we continue to believe the homebuilding industry is still in the early stages of recovery,” concluded Mr. Hovnanian.

Posted in Employment, GDP, Housing | No Comments »

existing home sales chart, real final sales chart (pre weather)

Posted by WARREN MOSLER on 21st February 2014

Yes, the Fed doesn’t like QE and wants to taper, but seems to me they don’t want mortgage rates this high either. They know the only way the market will ‘bring down rates’ is if the economic weakness persists. And they suspect it very well may persist unless rates come down.

Their remaining option is TIRT (term interest rate targeting) which has yet to be discussed.

Existing Home Sales

It’s more than just weather that’s clobbering the housing market. High prices and tight inventory aren’t helping either as existing home sales fell 5.1 percent in January to a 4.620 million annual rate. The year-on-year rate is also at minus 5.1 percent, a sharp contrast to the year-on-year median price which is up 10.7 percent.

Supply of homes relative to sales did rise to 4.9 months from 4.6 months but the improvement is tied mostly to the drop in sales. Prices did come down in the month but from already high levels with the median price down 4.5 percent to $188,900.

Weather was especially cold in January and no doubt contributed to the sales weakness, especially in the Midwest, where sales fell 7.1 percent in the month, and also the Northeast where the decline was 3.1 percent. But weather in California wasn’t a problem, yet sales in the West fell 7.3 percent which the National Association of Realtors points to as evidence of non-weather constraints.

Unattractive mortgage rates are another factor holding down sales. All cash buyers continue to hold up the market, accounting for 33 percent of all sales vs 32 percent in December. In contrast, first-time buyers, who are especially sensitive to the soft jobs market, continue to account for less sales, at 26 percent vs December’s 27 percent.

This is the 5th decline in the last 6 months for this series and lack of improvement in the jobs market, not to mention this month’s severe bout of heavy weather, point to more trouble for February. For the economy, the housing market needs to snap back sharply this spring. The Dow is showing little initial reaction to today’s report.

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Not exactly gang busters even before the weather reduced incomes.

And the bad weather it’s like hurricane sandy but without the insurance spending and federal relief spending.

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Posted in Fed, GDP, Housing, Interest Rates | No Comments »

tv interview

Posted by WARREN MOSLER on 17th February 2014

Posted in Deficit, Economic Releases, Employment, GDP | No Comments »

Retail sales and jobless claims

Posted by WARREN MOSLER on 13th February 2014

From CS:

JAY FELDMAN : Q4 GDP revision is now tracking 2.4 on our estimates. It was tracking 2.7 before retail sales… and down from the initially reported 3.2.

Note October/November/December all marked down lower as well in US retail sales…and even prior to this period as well – will bring down Q4 GDP tracking for consumption.

Again, the income to support sales just doesn’t seem to be there, as the sub 3% federal deficit doesn’t seem to have been providing the spending needed to offset the demand leakages (unspent income):

Retail Sales

Overall retail sales in January fell 0.4 percent, following a decrease of 0.1 percent in December (originally up 0.2 percent). The market consensus was for a 0.1 percent dip.

Autos pulled down the total. Motor vehicle & parts declined 2.1 percent, following a decrease of 1.8 percent in December. Excluding autos, sales were unchanged after gaining 0.3 percent the month before (originally up 0.7 percent). Analysts called for a 0.1 percent rise. Gas station sales increased 1.1 percent after jumping 1.5 percent in December. Excluding both autos and gasoline, sales slipped 0.2 percent after rising 0.1 percent in December. The consensus was for a 0.2 percent rise.

In the core, strength was seen in electronics & appliance stores; building materials & garden equipment; and grocery stores. Declines were seen in furniture & home furnishings; health & personal care; clothing; sporting goods, hobby, et al; department stores; nonstore retailers; and food services & drinking places.

The latest report suggests that fourth quarter GDP may be revised down and that first quarter GDP could be soft. Again, atypically adverse weather likely affected the data. Equity futures declined on the news.

When I squint at this chart if anything it seems to have bottomed and nudging irregularly higher:

Posted in Economic Releases, Employment, GDP | No Comments »

Tweet from Greg Ip

Posted by WARREN MOSLER on 13th February 2014

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Jobs, productivity

Posted by WARREN MOSLER on 7th February 2014

It’s going to take more than two weak prints to sway the Fed…

I see the odds of this expansion cycle being over increasing with each release, as the drivers of H2 continue to fade- housing, cars, income, inventory, and, at least for now, jobs.

And the federal deficit- the economy’s ‘allowance’ from Uncle Sam- is no longer enough to offset the demand leakages/unspent income inherent in the institutional structure.

That is, we’re flying without a net.

*note that the household survey was about 1 million jobs short of the payroll survey over the last year and routinely dismissed as an inferior indicator, and the rate of growth remains well below the Nonfarm Payroll report even after today’s release:

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The jump in productivity is making the rounds. It takes a lot more top line growth to need 200,000 new employees every month with this kind of productivity growth. Could be the ‘extra’ jobs we’ve seen, implying much lower productivity increases, were due to getting ‘over lean’ during the recession, and that ‘deficiency’ may now be behind us.

And note that the lower average job growth as per the household survey has been more in line with productivity over the last year.

I’m also thinking those with expiring benefits suddenly willing to take lower paying jobs will simply displace others already working in those job, which will work to keep hourly wages lower than otherwise.

Not updated for today’s yoy print of +1.9%:

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bill gross on credit expansion

Posted by WARREN MOSLER on 6th February 2014

It used to grow pre-Lehman at 810% a year, but now it only grows at 34%. Part of that growth is due to the government itself with recent deficit spending. A deficit of one trillion dollars in 20092010 equaled a 2% growth rate of credit by itself. But despite that, other borrowers such as households/businesses/local and foreign governments/financial institutions have been less than eager to pick up the slack. With the deficit now down to $600 billion or so, the Treasury is fading as a source of credit growth. Many consider that as a good thing but short term, the ability of the economy to expand and P/Es to grow is actually negatively impacted, unless the private sector steps up to the plate to borrow/invest/buy new houses, etc. Credit over the past 12 months has grown at a snails 3.5% pace, barely enough to sustain nominal GDP growth of the same amount.

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Posted in Credit, GDP, Government Spending | No Comments »

Chici economy

Posted by WARREN MOSLER on 4th February 2014

Chici economy- carless, homeless, incomeless, creditless, inventory-building economy

Car sales fell and inventories up again:

GM said its inventory ballooned to 114 days’ supply. Fiat Chrysler said its inventory amounted to 105 days worth of vehicles at January’s sales pace, up from 79 days in December. Ford’s inventory rose to 111 days. Dave Winslow, chief digital strategist at technology provider, said he didn’t see any reason for sales to be hurt by weather.

EM currencies to hurt US earnings translations.

Last year’s austerity measures seem to have taken their toll on disposable personal income, which ultimately supports growth:

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No consumer relief via energy prices, which if anything, are a bit firmer.

Redbook and Goldman sales today both weak, though ‘minor’ indicators:

The trend for chain-store reports, first ICSC-Goldman earlier this morning and now Redbook, continues to slope sharply downward with Redbook’s year-on-year same-store sales rate at plus 2.7 percent in the February 1 week, driving down the 4-week average by 3 tenths to plus 3.0 percent for the lowest reading since June. Heavy and especially cold weather have been taking a toll on store sales so far this year. Watch for January reports from chain stores themselves on Thursday’s Econoday calendar.

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GDP and unemployment claims charts

Posted by WARREN MOSLER on 30th January 2014

The economy ended the year on a moderately positive note, rising an annualized 3.2 percent in the advance estimate for the fourth quarter. This followed a 4.1 percent boost in the third quarter. The consensus expected a 3.0 percent rise in the fourth quarter.

But demand was not as strong. Final sales of domestic demand gained 2.8 percent after a 2.5 percent boost in the third quarter. Final sales to domestic purchasers slowed to 1.4 percent in the fourth quarter after a 2.3 percent increase the prior quarter. The softening was largely due to a drop in government purchases. A positive was improvement in consumer spending.

Inflation is soft with the GDP price index rising only 1.3 percent after a 2.0 percent increase in the third quarter. The core price index eased to 1.7 percent, following a 1.9 rise in the third quarter.

A surprise 19,000 rise in initial jobless to a much higher-than-expected 348,000, together with a rising trend for continuing claims, are not pointing to much improvement for the labor market, at least for January. But a plus in the data is the 4-week average for initial claims, up only slightly to 333,000 which is more than 20,000 below the month-ago trend.

Another plus is a 16,000 dip in continuing claims to 2.991 million in data for the January 18 week. The 4-week average, however, is up sharply, 43,000 higher to 2.970 million which is the highest reading since August. The unemployment rate for insured workers, which had been as low as 2.1 percent in November, is at 2.3 percent for a 3rd straight week.

There are no special factors at play in today’s report though the latest initial claims are for the shortened Martin Luther King week which raises the risk of adjustment volatility. The Fed yesterday cited improvement underway in the labor market but its hard to find convincing proof in this report.

Posted in Employment, GDP | No Comments »

Durable goods less the expected…

Posted by WARREN MOSLER on 28th January 2014

Haven’t heard anyone suggest the federal deficit might be too small?


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So how well is Germany doing?

Posted by WARREN MOSLER on 16th January 2014

So how well is Germany doing?

German Economic Growth Fails to Gain Impetus (WSJ) Germany’s gross domestic product expanded 0.4% in 2013, following growth of 0.7% in 2012, the Federal Statistics Office said on Wednesday. The economy grew 0.5% when taking account of the number of working days each year. Based on the full-year figures, GDP increased around 0.25% in the three months through December about the same rate as the third quarter according to the statistics office, which is due to publish fourth-quarter national accounts in mid-February. Germany’s growth last year relied on domestic demand, as private consumption rose 0.9% and government spending increased 1.1%, the statistics office said. Net trade, however, reduced GDP growth, as exports the traditional driver of economic growth in Germany increased a meager 0.6%, while imports climbed 1.3%. Corporate investment was weak too, with spending on machinery and equipment down 2.2% from a year earlier.

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headline retail sales y/y

Posted by WARREN MOSLER on 14th January 2014

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