Posted by on January 8, 2019 3:10 am
Categories: µ Newsjones

All the day’s economic and financial news, as Germany’s factories suffer a 4.7% annual drop in output

A simple mapping between industrial production and German GDP growth points to recession (even assuming a December rebound). Not good. Full analysis on terminal here:

ING economist Carsten Brzeski also sees a significant risk that Germany is heading into a recession, following the unexpected slide in industrial output.

However, Brzeski also argues that Germany’s economy is fundamentally sound:

At face value, today’s industrial production data has clearly increased the risk of a technical recession in Germany in the second half of 2018. Watch out for tomorrow’s trade data. Another disappointment, combined with the high inventory build-up in 2Q and 3Q, would clearly increase the likelihood of a technical recession. On the other hand, private and public consumption still have the potential to offset recession forces.

Looking ahead, however, even a technical recession should be nothing to be too worried about. It should be technical, without any significant marks on the labour market. In fact, there are still plenty of reasons to remain optimistic, even for German industry: despite the recent deflation of new orders, order books are still richly filled and companies still report assured production close to record highs and while capacity utilisation has dropped to its lowest level since the third quarter of 2017, the lack of equipment still is a more limiting factor to production than the lack of skilled workers.

Industrial production data today has clearly increased the risk of a technical recession in Germany in the second half of 2018, says @carstenbrzeski

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