German industrial slump deepens, weighing on eurozone outlook
Two-year recession in industrial heartlands worsens but services confidence rises
The two-year recession in Germany’s industrial heartlands is deepening, according to new data showing that orders in the country’s core manufacturing sector fell by more than expected in November — defying expectations of a rebound.
New German manufacturing orders fell by 1.3 per cent in November compared with the previous month, according to provisional figures published by the Federal Statistics Office on Wednesday. Economists polled by Reuters had expected an increase of 0.2 per cent.
The bad news was slightly mitigated by revised figures for October showing that manufacturing orders rose 0.2 per cent in that month, compared to an earlier estimate of a fall of 0.4 per cent.
The downturn in German manufacturing has weighed on overall eurozone growth, although it has been partially offset by resilient consumer spending.
This trend continued in December, according to the latest economic sentiment survey by the European Commission, also published on Wednesday, which found that confidence rose among services companies in the region while it fell among industrial groups.
Overall the commission’s sentiment indicator rose slightly in December, although the fourth quarter was still down on the previous quarter.
“All in all, today’s data are consistent with the message from other surveys that while the eurozone is not falling into recession, there is no sign that growth is picking up either,” said Jessica Hinds at Capital Economics.
The fall in German manufacturing orders in November was mainly due to a sharp drop in bulk orders. Excluding bulk orders, orders rose by 1 per cent from the previous month.
German manufacturers’ domestic orders reversed earlier falls, but this was more than offset by a sharp fall in foreign orders. The heaviest decline came in orders from other euro area countries, which fell month on month by 3.3 per cent. Overall, German industrial orders fell by 6.5 per cent in the year to November.
Carsten Brzeski, an economist at ING, said German industrial orders fell by a monthly average of 0.6 per cent in 2019, down from monthly declines of 0.4 per cent in 2018.
The last time the country suffered two consecutive years of contraction in industrial orders was in 2001 and 2002.
“All in all, there are still no signs at all of a bottoming out for German industry,” said Mr Brzeski. “Instead, the freefall continues.”
Germany’s export-focused economy has been knocked by the US-China trade war, uncertainty over Brexit and a sharp decline in the car industry, which is grappling with new emissions rules and a shift to electric vehicles. Exports from the country’s automotive sector, which employs 3m people directly and indirectly, fell by 13 per cent last year.
Europe’s largest economy grew by only 0.1 per cent in the three months to September, narrowly avoiding a recession as higher household and government spending and a rebound in exports helped to offset a decline in industrial production.
Full-year figures for German economic growth are due to be published next Wednesday and are expected to show meagre growth of 0.1 per cent in the final quarter.