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Prospects Daily: German industrial orders pick up again

Global Macroeconomics Team's picture

Important developments today:

1. G3 countries’ government bonds turn lower amid declining demand for safe-haven assets

2. Demand for investment goods drive increase in industrial production in Germany


G3 countries’ government bonds turn lower amid declining demand for safe-haven assets. Demand for U.S., Japanese, and German government bonds declined as expectations that the global economic recovery is gathering pace reduced demand for safe-haven government bonds. U.S 10-year Treasury notes extended yesterday’s loss, the biggest one in 18 months as the announcement of the two-year extension of Bush-era tax cuts boosted investor expectations of continued U.S .recovery. The yield on the 10-year securities climbed 6 basis points (bps) to 3.19%, after reaching 3.25%, the highest since June 22. And Japanese 5-year note yields jumped 10 bps to 0.524%, the most in more than two years, while the German 10-year bund yield rose above 3% for the first time since May.

Demand for investment goods drive increase in industrial production in Germany. Industrial production in Germany was up 2.9% (m/m) in October, after a 1% decline in September. The rise in industrial output was driven by a 4.6% rise in investment goods, 2.7% rise in durable consumer goods and a 1.3% rise in construction output [see Chart at http://gem or]. Figures released on Tuesday by the Economy Ministry showed that much of the increased demand in October was due to the strengthening of domestic demand. Indeed in a separate report released today, exports in Germany are observed to have dropped by 1.1% (m/m) in October, showing the importance of the strengthening domestic demand in supporting industrial activity. This is likely to continue in Q4, as November’s purchasing managers index for Germany points to continued expansion in industrial output. According to the Bundesbank, Germany’s GDP is forecast to grow by 3.6% in 2010 – this would be the fastest pace since reunification. 

Among emerging markets

In Central and Eastern Europe and the CIS,  Turkey's industrial output rose 3.1% (m/m) in October, the fastest pace in over a year, as demand for cars and electronic appliances boosted factory output.

In Latin American and the Caribbean, inflation in Brazil grew at the fastest monthly pace in five years this November, jumping 0.83% from the previous month. This brings 12-month inflation up to 5.6%, well above the central bank's target level of 4.5%.

In Sub-Saharan Africa, Mozambique's real GDP grew 7.4% (y/y) in Q3, moderating down from the 8.8% growth recorded in the previous quarter. However, inflation which is up to 15% for the year, due to weakening in the currency and the removal of price controls, threatens to derail the recovery.


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