Participating in those American sanctions was a great idea for Germany, was it not - fortress Deutchland is certainly strong enough to survive the loss of the Russian market…or is it? Needless to say, the FT points to everything (slowing Chinese Growth for fukksake - China is growing by 7.5% per annum, give or take a couple of tenths of a point) except the obvious. but the obvious is staring the in the face. Plunge in industrial production stokes German recession fears By Stefan Wagstyl in Berlin and Jamie Chisholm in LondonAuthor alerts German industrial output suffered its biggest monthly decline in more than five years in August, raising fears that Europe’s biggest economy might be heading for recession and prompting renewed concern about the economic health of the eurozone. Output plunged 4.0 per cent from July, data published on Tuesday show, far more than the average 1.5 per cent drop forecast by economists and the largest decrease since February 2009, when the global financial crisis first hit Europe’s factories. Coming on top of poor August data for industrial orders earlier this week, the numbers indicate that Germany is starting to suffer from a global weakening in demand for its exports due to geopolitical upheavals and slower growth in China. With the figures influenced by plants closing for later than usual summer holidays, economists hedged their bets about the outlook for the rest of the year. But they are no longer ruling out Germany falling into recession – with a possible decline in gross domestic product coming in the third quarter on top of the 0.2 per cent drop recorded in the three months to June. Carsten Brzeski of ING bank wrote that a strong labour market and robust domestic consumption should “at least partly” offset weaker industrial output. “Whether this will be enough to avoid a technical recession, ie another contraction in the third quarter, is with today’s industrial production numbers too early to tell.” Ralph Solveen, economist at Commerzbank, took a more optimistic view, saying that the late timing of summer holidays was “key”. But he too now expects GDP to fall growth to fall towards zero. “The trend is pointing down, with the German economy in the third quarter likely to have stagnated at best.” The euro, which has already dropped markedly over the summer, was down 0.3 per cent against the dollar on Tuesday. The FTSE Eurofirst 300 was down 0.7 per cent as investors absorb the latest in a line of data suggesting activity on the continent is waning into the fourth quarter. The 10-year Bund yield was down 1 basis point to 0.90 per cent, only a few basis points above record lows. Announcing the figures, the economics ministry said in a statement: “Industrial production is currently going through a weak phase ... but the current decline is exacerbated by holiday effects. Altogether, weak production should be expected for the third quarter as a whole.” Adding to the gloom, the ministry revised downwards the figures for July when output was boosted by factories delaying holidays. It reduced estimated growth from 1.9 per cent to 1.6 per cent – making the average figure for the two months 0.7 per cent down on the previous quarter. The industrial production figures follow data on Monday showing a 5.7 per cent plunge in factory orders in August, the largest decrease since January 2009. Forward-looking measures of sentiment – including the purchasing managers’ index and the widely-followed Ifo index – have also weakened markedly in the past months. August industrial output was particularly badly hit by an 8.8 per cent drop in investment goods, such as machinery. This highlights the worries of companies about their prospects – and concerns about persistent low investment in Germany. It will renew arguments about boosting investment – either by improving conditions for entrepreneurs, as liberals in chancellor Angela Merkel’s conservative CDU/CSU bloc would like, or by boosting public investment, as the leftwing of her social democrat coalition partners advocates. Andreas Rees, chief German economist at UniCredit, said the setback in the outlook for the German economy after the industrial production data was “a massive one”. However, he said there was “no reason to panic”.
Posted on: Tue, 07 Oct 2014 12:28:39 +0000
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