With US non-farm payrolls posting an unexpectedly strong 200,000 gain in December and German industrial orders now shrinking, are we about to see a great transatlantic decoupling?
Germany was always vulnerable to the chill winds blowing in from southern Europe. A greater proportion of German exports goes in aggregate to Italy and Spain (9.8 per cent in 2010) than to either the US (6.9 per cent) or China (4.9 per cent). Demanding austerity from fiscal sinners is all very well but German exporters are now being presented with the bill: export orders are clearly in retreat – and not only to destinations within the eurozone.
At first sight, the December payrolls gain, alongside a further welcome drop in the unemployment rate, suggests the US has some degree of economic immunity from the eurozone crisis. Decoupling may be a dirty word but it does, occasionally, happen. After all, the US decoupled from Asia following the 1997 Thai baht crisis.
Could the same thing happen again? Compared with the late-1990s, however, there are also some big differences. Back then, payrolls gains were running at 300,000 or more a month, growth was ticking along at 4 per cent, the housing market was a picture of health, the word “subprime” had not yet been invented and the financial system worked (often a little too well).