There was some good news for Europe's economy yesterday, apart from Germany settling on its chancellor.
German exports, the mainstay of the nation's economic expansion, rose in August by the most since January as a drop in the euro helped bolster demand. Exports, adjusted for working days and seasonal changes, gained 3.5 percent after rising 0.9 percent in July, the Federal Statistics Office in Wiesbaden said today in a statement...
Germany's trade surplus narrowed to 11.6 billion euros ($14.1 billion) in August from 14.5 billion euros in July, the statistics office said. Adjusted for seasonal effects, the trade balance was 12.7 billion euros in August. Adjusted imports gained 6 percent after rising 3.6 percent in July, the report showed...
German industrial production fell 1.6 percent in August, its first decline in three months, the Economy and Labor Ministry said Oct. 7. A day earlier the ministry reported that factory orders fell 3.7 percent in August, the first decline in four months, led by a drop in demand from abroad...
In France industrial production rose in August at the fastest pace in almost a year, suggesting Europe's third-largest economy is picking up from a second-quarter slowdown. French factories, utilities and mines increased production by 0.8 percent from July, when the output dropped a revised 0.7 percent, national statistics office Insee said in Paris today.
However, the UK economy is seeing some unpleasant contradictions as producer prices rise:
The cost of goods leaving British factories increased for the third consecutive month in September, as prices of gasoline and diesel recorded their biggest rise in more than five years.
Factory-gate prices, which are not adjusted for seasonal swings, increased 0.7 percent in September after rising 0.3 percent in August, the statistics office said today. That was above the median estimate of 0.3 percent in the month, in a Bloomberg survey of 27 economists. The annual rate increased 3.3 percent, the highest since April.
...but house prices moderate:
The UK house price inflation rate fell from 4.0 per cent in July 2005 to 2.8 per cent in August 2005... The UK price between July and August was effectively unchanged...
...and consumer demand falters:
U.K. retail sales fell for a sixth month in September, the British Retail Consortium said, a sign that a slowdown in consumer spending may be worsening.
Sales in stores open at least a year fell 0.8 percent from September last year, the BRC, a London-based lobbying group that represents 80 percent of U.K. retailers, said in an e-mailed report today. That followed a 1 percent decline in August.
Although there were no significant economic data from the US yesterday, it was nevertheless an eventful day in financial markets.
U.S. stocks slid on Monday, with the Dow and S&P 500 hitting their lowest levels in about five months, after General Motors Corp. said auto parts supplier Delphi Corp.'s bankruptcy filing could cost it as much as $12 billion.
The Nasdaq Composite Index slipped to a three-month low, dragged lower by technology shares after Xilinx Inc., a maker of programmable microchips, cut its sales estimate for the September quarter, citing weakness in Asia-Pacific demand and other factors. Xilinx shares fell 16 percent to $22.77.
Delphi's bankruptcy was deemed significant enough to elicit a commentary from Morgan Stanley chief economist Stephen Roach.
Delphi’s bankruptcy is a big deal. It is emblematic of a new set of pressures bearing down on the US. The global rebalancing framework that I continue to embrace suggests that the world’s growth and asset return dynamic has only just begun a major tilt away from the US and dollar-based assets. If that’s the case, America will have little to offer in a low-return world for risk-averse and yield-hungry investors. Could Delphi be the long awaited wake-up call that drives this realization home?
And even Brad Setser was moved enough to weigh in with his own comments, including the following:
I suspect the real risk here is not the most obvious risk. Further trouble from US-based auto makers and auto parts suppliers should not be a surprise to anyone. A real surprise might come from firms in currently strong sectors - sectors whose growth must slow in any global "rebalancing" scenario.
And the point could be extended geographically too -- a surprise might come from countries with strong economies. See, for examples, Morgan Stanley's Andy Xie on Korea and Chetan Ahya on India.
And along somewhat similar lines, see also Barry Ritholtz's post "Insolvency Epidemic".
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