German Industry Slump Deepens as Recovery Proves Elusive
German Industry Slump Deepens as Road to Recovery Proves Elusive
(Bloomberg) --
German industrial production continued to worsen, putting a damper on recent signals of improvement in the euro area and its largest economy.
Output fell 0.6% in September, compared with economist estimates for a slide of 0.4%. Manufacturing fueled the decline, while construction and energy increased. The reading follows reports showing German factory orders rose more than expected and a gauge for private-sector activity in the euro area edging up.
Any road to recovery will be long. While Siemens AG’s Chief Executive Officer Joe Kaeser told Bloomberg TV he expects the downturn to “level out over the next six months,” the company warned that weakness in the auto and factory equipment industries will lead to a decline in some business volumes next year.
German industry output was down an annual 4.3% at the end of the third quarter, when the country probably sank into a technical recession.
What Bloomberg’s Economists Say
“September production data complete the picture for the third quarter and show industry acted as another big drag on economic growth. Assume growth in services was a little slower as well, and it seems likely the economy contracted slightly in the third quarter -- that would mark a technical recession.”
--Jamie Rush. Read the GERMANY REACT
Chancellor Angela Merkel’s economic advisers lowered their growth forecasts for this year and next, warning that the protracted industry slump threatens to draw down the broader economy.
“The weakness in industry is not yet overcome,” the economy ministry said in a statement Thursday. “But the recent slight improvement in orders and business expectations brightened the outlook for the fourth quarter somewhat.”
| September | August | |
|---|---|---|
| Manufacturing | -1.3% | 0.8% |
| basic goods | -1.3% | 0.9% |
| investment goods | -1.5% | 1.3% |
| consumer goods | -0.5% | -0.9% |
| Energy | 2.0% | -0.6% |
| Construction | 1.8% | -1.1% |
The continued frailty puts further pressure on governments to step up fiscal spending, a message pushed by former ECB President Mario Draghi before his term ended last week and is expected to be continued by his successor Christine Lagarde. The central bank announced a contentious new monetary-stimulus package in September in an attempt to revive growth and inflation.
Yet governments have been reluctant, with Germany sticking to its stance that Europe’s economic engine will pull through its current trough without a spending jolt. Finance Minister Olaf Scholz said Wednesday there’s no immediate need for a fiscal stimulus package to pump up growth.
Momentum may pick up in coming months as uncertainty recedes. China and the U.S. have agreed to proportionally roll back tariffs on each other’s goods in phases, suggesting the trade war that’s cast a shadow over the world economy might finally de-escalate.
Any such deal would be good news for export-reliant Germany, where trade has been a drag on output in four of the past five quarters for which data are available.
--With assistance from Kristian Siedenburg, Harumi Ichikura and Daniel Schaefer.
To contact the reporter on this story: Yuko Takeo in Frankfurt at ytakeo2@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow
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