Taps Coogan – May 27th, 2022

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The following chart, from Frederik Ducrozet, shows the ratio of new orders to inventories as well as the Eurozone Manufacturing PMI (purchasing managers survey).

The punchline is that the ratio of new orders to inventories has fallen to less than ‘1,’ indicating excessive orders relative to demand, and foreshadowing contraction in manufacturing PMIs and probably a recession in the Eurozone this year.

Zeroing in on Germany, the largest Eurozone economy, real GDP was still lower in the first quarter of 2022 than it was in late 2019. Given that the working age population in Germany in now shrinking by between 500,000 and one million people per year, Germany’s 2019 GDP may end up being a long standing record.

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