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
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
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.