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German recession fears after big decline in industrial production

August 7, 2019

 

 

German industrial production has suffered its biggest annual decline in nine years after the escalating trade war between the US and China took its toll on exports.

 

Europe’s economic engine, which has increasingly relied on exports to Asia to bolster factory output, was left teetering on the edge of recession in the second quarter after a 1.5% fall in industrial production in June, which is expected to be repeated in July.

 

Output fell across the three months to June by 1.8% compared with the first quarter of the year, driven by steep drops in metal production, machinery and automobile manufacturing, the economy ministry said.

 

“Industry remains in an economic downturn,” the ministry said. Production in construction fell 1.1% in the second quarter while energy output dropped 5.9% in the same period.

 

Analysts blamed the slump largely on a decline in sales of machine parts and cars to China and the far east, where falling currency values have made imports more expensive.

 

Fiona Cincotta, a senior market analyst at City Index, said: “If traders needed further evidence of the slowing global economy, they only needed to look towards German industrial production figures. As if on cue and adding to traders’ woes, data from Germany showed that industrial production dropped 1.5% month on month in June, significantly worse than the -0.5% decline forecast.”

 

Fears that the global economy is sliding towards recession have gripped financial markets in recent weeks. A recent escalation of the trade war between the US and China heightened tensions.

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