German Industry Slump Deepens as Road to Recovery Proves Elusive (Bloomberg)
Last Modified: 02:23 AM, Thu Nov 07, 2019

Yuko Takeo

Bloomberg. 07 November 2019

Word Count: 327

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. Output was down an annual 4.3% at the end of the third quarter, when the country probably sank into a technical recession. "The weakness in industry is not yet overcome," the economy ministry said today. "But the recent slight improvement in orders and business expectations brightened the outlook for the fourth quarter somewhat."

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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. Output was down an annual 4.3% at the end of the third quarter, when the country probably sank into a technical recession.

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.”

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.

--With assistance from Kristian Siedenburg and Harumi Ichikura.

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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Slugline: BC-German-Industry-Slump-Deepens-as-Road-to-Recovery-Proves-Elusive