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Wednesday, November 02, 2011 12:26 PM

Europe Undeniably in Recession; Germany Manufacturing PMI Contracts for First Time in Two Years, New Orders Collapse

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Berlin halved its 2012 German economic forecast for 2012 to one percent. What does that say for the rest of Europe? Will Germany even grow at all?

While pondering those questions please note German manufacturing shrinks in Oct for 1st time in 2 years

Germany's manufacturing sector contracted in October for the first time in more than two years as new orders fell for a fourth month in a row, data showed on Wednesday in the latest sign Europe's bulwark economy is set for a sharp slowdown.

Markit's Purchasing Managers' Index (PMI) fell for a sixth consecutive month in October to hit 49.1 -- just above an initial estimate of 48.9 but below the key 50 line that divides growth from contraction.

It was the first time activity had shrunk since September 2009 and it was the lowest PMI reading since July 2009. The sub-index for new orders fell to 45.1, showing the outlook is darkening for the German economy, which recovered from the financial crisis faster-than-expected and outperformed its peers over the past year.

The reading for export orders fell even further in a fresh sign that weakness in key markets abroad and uncertainty due to the euro zone debt crisis is hurting German trade.

Berlin last month nearly halved its forecast for 2012 growth to 1 percent due to weaker expectations for exports.
Trend Not Your Friend

Unless you are hoping for recession, the trend is not your friend as this table of October Final Manufacturing PMI shows.

Europe Undeniably in Recession

With China slowing, the US slowing, and much of the rest of Europe in widely-recognized contraction, the vaunted German export machine has a shrinking pool of able and willing buyers.

Europe is clearly in recession now, including Germany. Expect a dramatic and escalating turn for the worse, because it's coming.

Mike "Mish" Shedlock
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