Germany Gets Warning That It’s a Long Way From Overcoming Slump

(Bloomberg) --

Germany got a sharp reminder that its key industries have a long way to go to overcome a slump that’s already lasted more than a year and tipped the economy close to recession.

An unexpected fall in factory orders at the start of the fourth quarter suggests momentum in Europe’s largest economy will remain sluggish for some time. Demand fell 0.4% on the month and was down 5.5% compared with a year earlier.

There was better news from the broader euro area on Thursday, with figures showing relatively broad-based expansion in the region in the third quarter. Growth in exports and consumer spending picked up, and a modest drag from net trade was due to import strength.

The mixed figures capture the euro zone’s shaky situation amid risks including trade uncertainty, car-industry upheaval and Brexit. The Bundesbank has said Germany’s economy will probably stagnate this quarter, and there’s little sign of a rebound any time soon. Growth is set to remain below 1% in 2020.

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Europe may get little support from the global economy, which Bloomberg Economics says is “struggling to find its way out of the slow lane.” The latest reading for its global GDP tracker points to growth of 2% in the fourth quarter, down from the 2.3% pace seen in the previous three months.

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In the euro area, the new GDP breakdown showed household spending picked up to 0.5% in the third quarter from 0.2%. Exports rose 0.4%, double the pace of the previous period, and imports jumped 0.6%. Gross fixed capital formation also saw growth, albeit at just 0.3%. The economy as a whole expanded 0.2%.

Euro-area retail sales on Thursday posted a bigger-than-forecast 0.6% decline in October, and figures earlier this week suggested the economy may grow only 0.1% this quarter. In Germany, industry activity continued to contract in November, and business confidence remained muted.

“The great order book deflation in German industry continues,” said Carsten Brzeski, chief economist at ING Germany. This “does not bode well for industrial production in coming months. The trade conflict, global uncertainty and sector-specific shocks are clearly weighing.”

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