After months of Germany playing reluctant parent to Europe through its financial woes, there are emerging signs that the German economy may be taking a hit itself.
Business Insider has reported that the latest manufacturing Purchasing Manager's Index (PMI), which measures major orders of goods and services by firms in manufacturing and non-manufacturing industries in the private sector, is showing a 36 month low, having fallen by 1.6 per cent this month.
This fall in Germany's PMI measure has been accompanied by an increase in the Spanish Exchange Traded Fund (ETF), the EWP against the German ETF, the EWG. These measures show that Spain's EWP has increased by 1 per cent whilst Germany's has fallen by 1 per cent.
Joe Weisenthal also points out that the Ifo Business Climate Index, a key measure of business confidence in the country, fell:
The Index fell to 105.3, below the 105.6 that was expected, and well below last month's 106.9.
Weisenthal explained this data as showing:
First of all, Germany's economy, as we've been writing about is cracking (finally) as all of its export markets are deteriorating.
More importantly, there's a growing sense that Germany is going to be on the hook, in some way or another, for the debts of its peers.
So even if the economy deteriorates, the Spanish market benefits from the fact that it may not go completely bust.
With the German economy begining to falter, he offers one final note of optimism:
An optimist might say that this is the best thing that could happen to Europe. After all, until Germany's economy weakens, it really has no incentive to see any kind of change, let alone economic stimulus, in Europe.
That said, Matt Yglesias at Slate has doubts:
The fact that a nation specializing in capital goods exports is vulnerable to shocks from abroad was eminently predictable so I'm not super-keen on the theory that German prosperity accounts for its political class' attitude toward the situation.
However the German public responds to the slow-down in its economy, these signs suggest that they may not be in a position to act as sole parent to Europe for much longer.