- Industrial production in Germany plummeted in December …
- … suggesting that GDP growth slowed down in Q4, but solid domestic demand should prevent GDP growth from contracting
Global-Daily-Insight-10-February.pdf (61 KB)
Industrial production in Germany plummets …
Germany’s industrial output fell for the second months in a row in December. It contracted by 1.2% mom, following -0.1% in November (revised upward from -0.3%). The outcome was well below the consensus forecast. During the final quarter of last year as a whole, production fell by 0.8% qoq, after it contracted by 0.3% in Q3. The weakness in Q4 was broad bases, with the production of energy, capital goods and consumer goods all declining markedly. In contrast, output in the construction sector and production of intermediate goods expanded.
… due to a weak global economy and a stronger euro
The contraction in Germany’s industrial sector reflects weakness in the global economy and the fact that a relatively large proportion of Germany’s exports are to BRICs (around 10% versus around 6% for the other big eurozone countries). Moreover, the positive impact of the depreciation of the euro on exports is petering out. Indeed, a separate report showed that exports fell by 1.6% mom in December and by 1.5% qoq during Q4 as a whole.
GDP growth to have slowed down in Q4 in Germany as well as in the eurozone
Part of the downward impact on Q4 GDP growth of the contraction in Germany’s industry and exports probably was compensated by stronger domestic demand and expansion in services production. Still, we expect GDP growth in Germany to have slowed down from the 0.3% qoq that was recorded in Q3. In the eurozone as a whole, we expect GDP growth to have slowed down as well in Q4. This data will be published on Friday. The consensus forecast is for a 0.3% expansion. Our own forecast is 0.2%, but we think there are even downside risks to this already below-consensus forecast.