Manufacturing remains weak in Europe's biggest economy.
- Industrial output shows surprise drop
- Weak orders suggest more trouble ahead
Frankfurt, 7 February 2020 (LS NEWS) – German industrial production fell much more than expected in December, ending what one analyst called a “terrible year” for manufacturing in Europe’s largest economy.
Output dropped at a monthly rate of 3.5pct, vastly exceeding the expected 0.2pct decline after November’s 1.2pct increase. Industrial production plummeted at an annual rate of 6.8pct in December versus the market estimate of a 3.7pct decrease.
ING Chief German Economist Carsten Brzeski said December’s monthly decline was the fifth in seven months. “After yesterday’s disappointing new orders data, industrial production and exports in December were hardly any better, ending a terrible year for German industry.”
On Thursday, Germany reported declines in factory orders of 2.1pct on the month and 8.7pct on the year in December, increasing the possibility of further difficulties in the sector.
Source: Pantheon Macroeconomics
Brzeski said the orders data and possible supply chain disruptions from the economic impact of the coronavirus in China are likely to delay the stabilisation of the sector and “suggest that any recovery will be slow and gradual.”
Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “Generally, the December new orders and output data has a bit of a kitchen-sink feeling. They are much worse than implied by the gradual improvement in the surveys.”
Recent polls of investors and purchasing managers pointed to better days for German industry, with the January Ifo business confidence survey showing an uptick in expectations for manufacturing. However, the bellwether index fell on a weaker outlook for services and construction.
Manufacturing struggles likely to remain
Data from the final month of 2019 capped off a difficult year for the German industrial sector.
Andrew Kenningham, chief Europe economist at Capital Economics, said: “December’s slump means that industrial production declined by 1.6pct quarter-on-quarter in the fourth quarter, a bigger fall even than in the third quarter, and the sixth successive quarterly contraction. This will have been sufficient to subtract 0.4 percentage points from GDP growth in the final quarter.”
Germany is set to report its economic growth data for the last three months of 2019 on 14 February (07.00 GMT).
“It is still too early to sound the all clear for German industry,” Kenningham said.
“We doubt that this will be the last of the run of negative quarters. Manufacturing surveys improved a bit in January, but they still pointed to a further decline in output.
“More recently, Germany’s auto firms have been hit by the fallout from the coronavirus, which is making it hard to source some key components. So any slight improvement in January will probably be nipped in the bud in February and March.”
- Industrial output shows surprise drop
- Weak orders suggest more trouble ahead
Frankfurt, 7 February 2020 (LS NEWS) – German industrial production fell much more than expected in December, ending what one analyst called a “terrible year” for manufacturing in Europe’s largest economy.
Output dropped at a monthly rate of 3.5pct, vastly exceeding the expected 0.2pct decline after November’s 1.2pct increase. Industrial production plummeted at an annual rate of 6.8pct in December versus the market estimate of a 3.7pct decrease.
ING Chief German Economist Carsten Brzeski said December’s monthly decline was the fifth in seven months. “After yesterday’s disappointing new orders data, industrial production and exports in December were hardly any better, ending a terrible year for German industry.”
On Thursday, Germany reported declines in factory orders of 2.1pct on the month and 8.7pct on the year in December, increasing the possibility of further difficulties in the sector.
Brzeski said the orders data and possible supply chain disruptions from the economic impact of the coronavirus in China are likely to delay the stabilisation of the sector and “suggest that any recovery will be slow and gradual.”
Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “Generally, the December new orders and output data has a bit of a kitchen-sink feeling. They are much worse than implied by the gradual improvement in the surveys.”
Recent polls of investors and purchasing managers pointed to better days for German industry, with the January Ifo business confidence survey showing an uptick in expectations for manufacturing. However, the bellwether index fell on a weaker outlook for services and construction.
Manufacturing struggles likely to remain
Data from the final month of 2019 capped off a difficult year for the German industrial sector.
Andrew Kenningham, chief Europe economist at Capital Economics, said: “December’s slump means that industrial production declined by 1.6pct quarter-on-quarter in the fourth quarter, a bigger fall even than in the third quarter, and the sixth successive quarterly contraction. This will have been sufficient to subtract 0.4 percentage points from GDP growth in the final quarter.”
Germany is set to report its economic growth data for the last three months of 2019 on 14 February (07.00 GMT).
“It is still too early to sound the all clear for German industry,” Kenningham said.
“We doubt that this will be the last of the run of negative quarters. Manufacturing surveys improved a bit in January, but they still pointed to a further decline in output.
“More recently, Germany’s auto firms have been hit by the fallout from the coronavirus, which is making it hard to source some key components. So any slight improvement in January will probably be nipped in the bud in February and March.”
Eric Culp, European Editor
@EricCulpLS