July 24, 2008
The global downturn has now hit Europe with its full force. Today, not only PMIs fell across the euro-zone. Also the German ifo-index took a bad hit, experiencing the largest one-month-drop since the recession of 2001. Both the expectations as well as the current conditions index dropped sharply. The expectations component is now not far away from levels seen during the last recessions.
Suddenly, even the German economy does not look as resilient any more as it was long claimed by some observers (see my post here on false complacency concerning the strong euro). Nevertheless, Germany still looks strong compared to the rest of Europe: According to the PMI surveys, the German manufacturing sector is merely stagnating while the sector in most of the rest of Europe already is in recession.