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Germany Recession Risk Rises After Industrial Production Slump - BLOOMBERG
(Bloomberg) -- German industrial production fell in October, kicking off the final quarter with an unexpected decline and dashing hopes that the key sector for Europe’s largest economy may slowly be overcoming its malaise.
Output decreased 1% from the previous month, worse than any forecast in a Bloomberg survey, which anticipated a 1% increase. The decline was mainly down to energy production, and “the automotive industry had a negative impact as well,” the statistics office said Friday.
“There’s still no end in sight to the industrial slump in Germany,” ING’s Carsten Brzeski said. “This is a very weak start to the fourth quarter, increasing the risk of a winter recession in Germany.”
Friday’s data contrast with figures earlier this week showing factory orders dropped less than expected in the month — and even increased slightly without large-scale orders, which tend to be volatile.
The manufacturing recession is weighing on the Germany’s economy, which is headed for a second straight year of contraction.
Bundesbank President Joachim Nagel has even warned that gross domestic product may also shrink in 2025 if US President-elect Donald Trump implements the trade tariffs he’s threatened on China and other countries.
While the services sector had been holding up well until recently, offsetting some of the industrial weakness, the latest business surveys from S&P Global showed a deterioration there too.
What Bloomberg Economics Says...
“The surprisingly weak October production numbers underscore the ongoing struggle of the German industry, with the fear of high US tariffs now added to existing problems such as weak demand from China and high energy costs.”
—Martin Ademmer, economist. For full react, click here
Industry is under pressure from external factors such as the loss of Russian energy supplies after the invasion of Ukraine and soft Chinese demand. At home, a shortage of skilled workers is a drag.
Due to the poor economic prospects, some companies have announced thousands of job cuts, especially in the flagship automotive sector, raising concerns about a downward spiral.
Some support may come from the European Central Bank, which is likely to reduce borrowing costs again next week and further in 2025.
--With assistance from Joel Rinneby and Kristian Siedenburg.
(Updates with comment in third paragraph)
