Surprise Fall In German Industrial Production Worsens Recession Fears
January 08 2019 - 2:33AM
RTTF2
Germany's industrial production unexpectedly decreased for a
third straight month in November, amid a sharp fall in consumer
goods and energy output, worsening fears of a technical recession
in the biggest euro area economy.
Overall industrial production fell a calendar and seasonally
adjusted 1.9 percent from October, when it decreased 0.8 percent,
revised from 0.5 percent, preliminary data from the Federal
Statistical Office showed on Tuesday.
Economists had expected a 0.3 percent increase. The latest
decline was the biggest since a 2.3 percent slump in July.
Industrial production decreased 1.8 percent and construction
output dropped 1.7 percent.
Manufacture of consumer goods fell 4.1 percent. Capital goods
output fell 1.8 percent and production of intermediate goods shrunk
1 percent.
Energy output decreased 3.1 percent and construction production
fell 1.7 percent.
Excluding energy and construction, industrial production
decreased 1.8 percent from the previous month.
On a year-on-year basis, industrial production fell 4.7 percent
in November after a 0.5 percent gain in October. Economists were
looking for a 0.8 percent decline.
Production slowed in the key sectors and the problems related to
the implementation of the WLTP emission tests continued in the
automobile industry, the economy ministry said.
Data released on Monday showed that manufacturing new orders
decreased for the first time in four months in November. However,
higher order backlog in the manufacturing sector suggests that the
industrial economy is gathering some momentum, albeit with subdued
momentum, the economy ministry said.
Automobile industry logged a noticeable gain of 4.5 percent in
orders in November.
The statistical agency is set to release the trade data for
November on Wednesday.
"At face value, today's industrial production data has clearly
increased the risk of a technical recession in Germany in the
second half of 2018," ING economist Carsten Brzeski said.
"Watch out for tomorrow's trade data. Another disappointment,
combined with the high inventory build-up in 2Q and 3Q, would
clearly increase the likelihood of a technical recession."
The German economy shrunk for the first time since early 2015 in
the third quarter and at the fastest pace in nearly six years,
mainly due to weak exports and car sales. GDP fell 0.2 percent
quarterly, marking the worst decline since the first quarter of
2013.
Another contraction in the fourth quarter would mean the economy
has slipped into a technical recession, which is two consecutive
quarters of negative growth.
That said, a technical recession should be nothing to be too
worried about given a strong labor market, favorable financing
conditions and signs of a pick up in the automobile industry,
Brzeski said.
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