06 Dec 2019
German industrial output surprisingly fell in October, reawakening previous concerns about the country’s economic growth forecast.
The manufacturing sector of Europe’s largest economy remains dented by global trade tensions and unsteady activity in the auto industry.
Industrial output was down 1.7% on the month, contradicting expectations of a 0.1% increase, according to Statistics Office figures published on Friday.
Capital goods production also tumbled 1.4% on the month, marking the sharpest drop in over five years.
The eurozone’s leading economy is currently enduring a rough period, as export-reliant manufacturers struggle amid ongoing trade disputes, a waning car sector and mounting uncertainty over the UK’s tumultuous exit from the European Union.
“Now the trepidation starts again about GDP growth in the final quarter,” said economist at Landesbank Baden-Wuerttemberg Jens-Oliver Niklasch.
As the economy entered its tenth consecutive year of growth, it has been largely depending on robust consumption as exports continue to decline, leading to GDP contraction of 0.2% in the second quarter.
During the three months leading to September, the economy climbed by a modest 0.1%, barely dodging a recession. A recession is defined by economists as two straight quarters of contraction.
“Trade conflicts, global uncertainty and disruption in the automotive industry have put the entire German industry in a headlock, from which it is hard to escape,” said Carsten Brzeski, economist at ING.
A number of economists have been calling on the government to abandon its policy of accumulating no new debt, saying that it should instead borrow money to fund a stimulus package.
The government however, is banking on trade tensions between the United States and China to ease, and on the EU to boost the country’s manufacturing sector.
“The economic weakness in industry remains,” said the ministry in a statement. “However, the latest developments in new orders and business expectations indicate that a stabilising trend could emerge in the coming months.”
Late last month, the Ifo economic institute said German business morale was up in November.
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