German industrial production drops, raising risk of recession
berlin — German industrial output unexpectedly fell in December for the fourth consecutive month, sending another signal that growth in Europe’s biggest economy is weakening.
Data from the Federal Statistics Office on Thursday showed industrial output was down by 0.4 per cent, confounding a Reuters forecast for an increase of 0.7 per cent.
Analysts said the fall makes it more likely that the economy contracted in the fourth quarter, which would translate into a recession after growth domestic product fell in the third quarter.
After nearly a decade of steady growth, the German economy has been facing headwinds from trade frictions between the United States and both China and the European Union. Britain’s possible departure from the EU next month without a deal is also clouding the outlook for German manufacturers.
December’s drop in industrial output was led by the construction sector, where activity shrank by more than 4 per cent, which could not be offset by a small rise in manufacturing output, a breakdown of the data showed.
The economy ministry said the auto sector, which has been a drag on the economy because new emissions
A positive GDP reading in the fourth quarter of 2018 now looks tight
Thomas Gitzel,
standards translated into fewer new vehicle registrations, rebounded in December as output rose by more than 7 per cent.
The figure for November was revised up to a fall of 1.3 per cent from a previously reported drop of 1.9 per cent. “A positive GDP reading in the fourth quarter of 2018 now looks tight,” said Thomas Gitzel of VP Bank Group. “A positive (industry) reading would have reduced the chance of a negative GDP reading in the fourth quarter.”
Growing signs of a slowdown have prompted the government to revise down its growth forecast for this year to 1 per cent.
Industry groups and economists have said complacency on the economy from Chancellor Angela Merkel is also contributing to the slowdown. They have urged her to grant families and businesses more generous tax cuts, and enact tax reforms that give women and the long-term unemployed more incentives to join the workforce. Merkel is also facing calls to make Germany more attractive to foreign workers to plug critical labour shortages.
VP Bank Group