Error Correction: Wolf's Howl is Off-Tune

Tuesday I posted an article that had two main points -- (1) Germany's improvements in exports did not, as Wolf argued, have any strong negative impact on the exports of other EU countries. (2) The main slowdown in demand in Europe came from capital spending and not from overall domestic demand. I concluded that Wolf's continued emphasis on stimulus spending was wrong-headed since the main problem in Europe seems to come from one sector -- capital spending.

In looking at my spreadsheets again, I found errors in the part that measures changes in capital spending. These errors do not change the above conclusions -- but since technically I wrongly quoted some numbers. I decided I needed to come clean!

In the article I said that capital spending had decreased in all EU countries. The numbers were very strong -- for example I erroneously said that overall EU capital spending had decreased by 90%. My corrected numbers show that EU spending on capital declined by 4% and that 14 of these countries exhibited declines ranging from -66% for Ireland to -1% for Latvia.

While these errors are important, they do not detract significantly from my conclusions.Consumer spending and export sales were very strong among the EU countries between 2006 and 2012.  The main spending sector contributing to slower growth in the EU was capital spending. The problem is not overall aggregate demand -- the problem is no real solutions for financial and housing problems.

I feel better now. Thanks.