Monthly industrial production drops sharply in Germany to add to the signs of an imminent recession

The
prospect of a recession in Germany has been the talk of the financial markets
for a few months. With monthly industrial production data coming at its worst
since January 2009 on Friday, as per the Federal Statistical Office of Germany,
the debate is now back to life again among the investors and analysts alike.

Friday’s
data highlighted the fifth decline in German monthly industrial production in
the previous seven months. Following December’s fall, Germany’s data marked an
around 7% drop in industrial production in 2019.

Exports
Grew By Only 0.1% In December

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The
report further highlighted that growth in the exports front wasn’t significant
either in December with the reading ticking up by only 0.1% as compared to the past
month. The data, as per the analysts, was an added pressure on the largest
European economy. Earlier in the week, factory orders in Germany were also
reported to have contracted by 2.1% as compared to the previous month.

President
of the German Institute for Economic Research (DIW), Marcel Fratzscher, commented
on Friday’s data and highlighted that the factors contributing to rising
prospects of a recession in Germany are plenty. He cited coronavirus emergency
in China, global trade slowdown, Brexit, geopolitical conflicts, and a weak
financial sector across Europe, and recommended that immediate action is
required from the German authorities if the country expects to sidestep
recession.

Forex
Market Didn’t Respond Aggressively To The Data

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Friday’s
data, however, didn’t have a strong impact on the forex market. One of the most
widely traded currency pair, EUR/USD
didn’t post a significant move that could be attributed to the data on
Friday. Nonetheless, chief economist Carsten Brzeski of ING Germany highlighted
that Friday’s reading hints at a higher risk of the next GDP report, scheduled
for next week, falling significantly shy of the estimate. In such an event, Brzeski
added, the prospect of a recession in Germany will be higher than ever.  

Germany
has had close calls for a recession in the past 18 months in which it saw contractions
in two quarters in a row, twice. The preliminary data announced growth at 0.6%
in Germany in 2019 that was branded the weakest since 2013.

The
government itself highlighted on Friday that the industrial economy is currently
weighed at large. Further insight
into the German economy will be available to discuss once the GDP report is
revealed in the upcoming week.