German Industrial Slump Deepens With Worst Output Drop in Decade
Employees work on the production line for the VW Golf series at the Volkswagen AG automobile manufacturing plant in Zwickau, Germany. (Photographer: Alex Kraus/Bloomberg)

German Industrial Slump Deepens With Worst Output Drop in Decade

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Germany’s industrial slump unexpectedly deepened in October amid a steep decline in investment goods, raising concerns that some of the early signs of a manufacturing revival may have already been smothered.

Output fell an annual 5.3%, the most in a decade, highlighting the damage U.S.-China trade tensions and Brexit uncertainty have done to the economy that once was Europe’s powerhouse. Makers of machinery and cars, a core part of German industry, have fared particularly badly, contributing heavily to the toll of 100,000 job cuts planned in the manufacturing sector.

German Industrial Slump Deepens With Worst Output Drop in Decade

The report is putting a question mark to claims that growth momentum will increase. German factory orders unexpectedly slipped in October amid weak demand for investment goods within the country and outside the 19-nation euro area, and business confidence -- while stabilizing -- remains subdued.

Bloomberg Economics’s Maeva Cousin said the latest drop in industry puts prospects for the fourth quarter at risk. It’s consistent with a drag on growth of almost 0.6 percentage point, according to her calculations.

The Bundesbank predicts the economy won’t grow at all this quarter, though the government in Berlin has resisted calls to roll out a significant fiscal stimulus package, arguing the economy is not in a crisis.

OctoberSeptember
Manufacturing-1.7%-1.3%
basic goods1.0%-1.1%
investment goods-4.4%-1.6%
consumer goods0.3%-0.8%
Energy2.3%0.2%
Construction-2.8%2.5%

The Economy Ministry acknowledged on Friday that industrial momentum is weak, but also offered a more optimistic take on the outlook. “Recent developments in orders and business expectations signal that a stabilization trend could take hold in the coming months,” it said.

The latest round of news also includes a gauge showing the euro-area economy kept just about expanding. That’s likely to feed into discussions at the European Central Bank’s policy meeting next week, where officials will be presented with updated projections for growth and inflation.

©2019 Bloomberg L.P.

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