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German industrial output contracts unexpectedly in October

Friday, 6 December, 2019 - 11:43

German industrial production fell 1.7 percent in October compared to September, according to figures released by the Federal Office of Statistics Destatis on Friday, a figure that was much worse than expected and illustrates the deep crisis experienced by the manufacturing sector over the past year. 

Economists polled by Reuters on average forecast an increase of 0.1 percent, with estimates ranging between -0.7 percent and + 0.6 percent.

Industrial production had already fallen by 0.6 percent in September.

On an annual basis, output was 5.3 percent lower than in October 2018, the biggest drop in factory output since the financial crisis, as trade tensions and problems in Germany’s car industry had a negative effect on activity.

The drop in the manufacturing industry of 4.4 percent was not sufficiently offset by growth in the construction (+ 2.8 percent) and energy (+ 2.3 percent) sectors. Production of intermediate goods increased by 1.7 percent in one month, consumer goods production by 0.3 percent, while production of capital goods dipped by 4.4 percent.

The largely export-oriented German industry has suffered for several months from the trade war between the US and China , Donald Trump’s threats to impose tariffs on German cars, and Brexit-related uncertainties. 

These data “suggest that the stagnation and contraction” of the German economy “continued in the fourth quarter of 2019,” says Carsten Brzeski, an economist at ING.

“Trade conflicts, global uncertainty and disruption in the automotive industry have put the entire German industry in a headlock, from which it is hard to escape,” Brzeski said.

Germany narrowly avoided recession in the third quarter of the year, posting a growth figure of 0.1 percent after a -0.2 percent contraction in the previous three months. However, today’s factory output figures pose the real possibility that the fourth quarter could see another dip into negative growth for the export dependent economy.

 


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