Arab Today, arab today clouds over german economy as industrial output exports fall
Last Updated : GMT 01:44:06
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Clouds over German economy as industrial output, exports fall

Arab Today, arab today

Arab Today, arab today Clouds over German economy as industrial output, exports fall

According to regular data compiled by the German economy ministry
Frankfurt - AFP

An unexpected drop in German industrial production in December, as well as a decline in exports, cast a shadow over the outlook for Europe's biggest economy, analysts said on Tuesday.

According to regular data compiled by the economy ministry, industrial output fell by 1.2 percent in December, disappointing analysts' expectations for a modest increase.

Factory output -- a key yardstick for gauging the health of Europe's biggest economy -- had already declined fractionally by 0.1 percent in November.

In December, it was weighed down by falling activity in all main sectors, with manufacturing output down by 1.1 percent month-on-month, energy output contracting by 3.0 percent and construction output slipping by just 0.2 percent, the ministry said.

Analysts had been pencilling in growth of 0.5 percent for the final month of last year.

Separately, the federal statistics office Destatis said that both exports and imports declined in December.

In calendar- and seasonally-adjusted terms, exports fell by 1.6 percent to 97.8 billion euros ($109 billion) in December and imports also declined by 1.6 percent to 78.4 billion euros.

That caused Germany's trade surplus -- the balance between exports and imports and a key gauge of an economy's comparative strength -- to contract to 19.4 billion euros, Destatis calculated.

Nevertheless, taking 2015 as a whole, Germany clocked up its highest-ever trade surplus as both exports and imports powered ahead to new annual records.
- Economic engine is faltering -

However, analysts were more concerned about the December data, and suggested that Germany's economic strength could be faltering.

The industrial output data "was the sharpest monthly drop since August 2014," said ING DiBa economist Carsten Brzeski.

While the decline could be partially explained by the timing of the Christmas holidays, taking the fourth quarter of last year, industrial production was down almost one percent, "illustrating the general weakness of Germany's former growth engine," Brzeski said.

Coupled with the drop in exports and imports, which showed that German exporters are also beginning to feel the pinch from weaker foreign demand, the data "were a painful reminder that not all is hunky dory in the eurozone's largest economy," the expert warned.

Capital Economics economist Jonathan Loynes agreed.

"Overall, the figures deal a further blow to expectations that growth in the German and eurozone economies will pick up in 2016," he said.

The European Central Bank would therefore need step up its stimulus, Loynes argued.

"We continue to expect both another interest rate cut and a pick-up in the pace of asset purchases" at the ECB's next policy meeting in March, he concluded.

ECB chief Mario Draghi has already hinted as much, saying last month that the central bank would review and possibly reassess its current monetary policy stance.

Commerzbank economist Ralph Solveen was not quite so pessimistic.

While the industrial output data underline that German manufacturing is increasingly suffering from the weakness in emerging markets,... the actually rather positive orders and sales figures give reason to expect a significant recovery of production in January," Solveen believed.

But BayernLB economist Johannes Mayr said the disappointing December data meant that his forecast for overall economic growth of 0.3 percent in the final quarter of 2015 now seemed "ambitious."

German gross domestic product expanded by 0.3 percent in the third quarter.

"But the outlook for the start of this year have also clouded over," Mayr said.

"The disappointing hard data for the end of last year will fuel concern that the German economy is more exposed to global worries and turbulence on the financial markets," the economist said, while ruling out a sharp cooling of the economy or even a possible recession.

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