testosteronepit.com / By Wolf Richter / February 22, 2013, 6:29PM
All hopes rest on Germany: its vibrant economy teeming with globalized, ultra-competitive, export-focused companies would drag France and other Eurozone countries out of their economic morass. But then, there’s reality.
That France with its double-digit unemployment fiasco is losing its grip was hammered home by the Purchasing Managers Index. After three months of false-hope upticks, it crashed to a low not seen since March 2009, the trough of the financial crisis! Business activity has been skidding for 18 months, and new orders, a precursor for future activity, for 19 months. The French private sector is in a heap of trouble [Draconian Cash Controls Are Coming To France].
On the other side of the Rhine, Germany is still bathing in optimism—though its economic output dropped 0.6% in the fourth quarter (henceforth called the awful GDP surprise), on par with the struggling Eurozone, which has now spent five quarters in the red. But France saw a much milder 0.3% decline. While France’s decline has been ascribed to structural issues, fixable only through a slew of reforms and adjustments that would tighten the belts around its people until they squeal, Germany’s much steeper decline was considered “temporary.” It would go away on its own.
Evidence of that chasm in perception: the Purchasing Managers Index. It was still in positive territory for Germany though it had dropped from January. While service orders stagnated, manufacturing orders ticked up. The “sharp rebound” in export business was attributed to higher demand from Asia. If only China would continue to pull through!
Alas, Germany’s most important trading partner isn’t China. Nor the US. It’s France. It mops up about 10% of Germany’s exports. And it’s not just cars and monstrous hardware. Germany exported, to name a delicious example, 645,000 metric tons of chocolate for €2.7 billion during the first eleven months of 2012, up 5.7% from prior year. The most important target country? France! It took 13.4% of it.