german dec 18 ind. production reaction
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  • Month-On-Month Growth Rises to -0.4pct from adjusted -1.3pct
  • Annual Rate Increases to -3.9pct from adjusted -4.0pct


Frankfurt, 7 Feb (LS News) – A weak construction sector held German industrial production in negative territory in December according to data released the day after the country’s factory orders for that month also fell short of expectations.


Industrial output in December improved to -0.4pct but missed the consensus of 0.8pct and the upwardly adjusted -1.3pct reading in November. Production in industry excluding energy and construction rose by 0.2pct, the German statistics office said, noting that production in construction fell by 4.1pct.


The seasonally and workday-adjusted annual rate for December increased to -3.9pct, which was short of -3.4pct estimate but slightly better than the upwardly adjusted -4.0pct reading in the previous month.


On Wednesday, Germany announced an unexpected decline in factory orders in December: The monthly rate dropped to -1.6pct versus the consensus of 0.3pct. The non-adjusted annual rate fell to -7.0pct, which was partially to blame on base effects.


Thomas Gitzel, chief economist at VP Bank Group, said the weak December production number indicates that Germany may have entered recession in the final quarter of the year after economic contraction in the third quarter.


“Positive GDP growth in the fourth quarter of 2018 will be a close call.”


The German statistics office said last month it expected “a small plus” for growth in the final three months of 2018. The office is scheduled to release a more detailed report for the period on 14 February.

Source: Pantheon Macroeconomics
Source: Pantheon Macroeconomics

Good News in the Details?


Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said the numbers showed some ground for optimism.


“Core manufacturing actually recovered a bit towards the end of Q4, despite poor survey and new orders data, though not nearly enough to neutralise the weakness since September


“We think these numbers will improve in H1, but the January surveys suggest that we have to curb our optimism for a huge rebound, at least in the very near term.” 


German companies have squelched their near-term hopes. January’s Ifo survey showed business confidence at its lowest level in almost three years. Firms expressed the most concern about the next six months; the expectations component of the survey dropped to a six-year low last month.


Commenting on its January survey, Ifo said: “The German economy is experiencing a downturn.”


More details about the performance of the German economy in December, specifically export and current account data, are due on Friday (0700 GMT).


Growth forecasts for Europe’s largest economy have suffered a wide range of downward revisions. In January, Berlin said growth this year will slow to 1.0pct, well short of its October prediction of 1.8pct. The German economy grew 1.5pct in 2018, the lowest rate in five years.


Ifo cut its 2019 GDP growth forecast for Germany to 1.1pct from 1.9pct in December.


--- Eric Culp

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