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Economists think that storm clouds are gathering across the global economy, and few indicators have been flashing as constantly as those tracking German industry.

The latest figures from Destatis, published this morning, show a 0.6% month-on-month decline for July, compared to economists’ average expectations of a rise of 0.4%.

That represented a further decline from the steep fall of 1.1% (revised up) in the previous month – although the weakness was somewhat anticipated by factory orders data yesterday.


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(@tEconomics)

#Germany Industrial Production month-on-month at -0.6% https://t.co/Wet9gUUlEY pic.twitter.com/E03lCxxKPE


September 6, 2019

In the second quarter of 2019 output shrank by 1.8%, as uncertainty around the US-China trade war and a global slowdown in demand for cars weighed on production.

Germany’s industry has now shrunk in six of the last 12 months, according to the Destatis data.

The industrial recession is continuing in the third quarter and looks set to drag on beyond that, according to Andrew Kenningham, chief Europe economist at Capital Economics. He said:


There is still no sign in the latest surveys that the manufacturing recession is bottoming out. The average reading of the manufacturing PMI in July and August was very low (just over 43) while the Ifo business climate for August fell to its lowest level since November 2012.




German chancellor Angela Merkel and Chinese premier Li Keqiang at a joint press conference at the Great Hall of the People in Beijing, China.

German chancellor Angela Merkel and Chinese premier Li Keqiang at a joint press conference at the Great Hall of the People in Beijing, China. Photograph: Clemens Bilan/EPA

The figures will be further food for thought for Angela Merkel, the German chancellor. She is in Beijing today, with dinner with Chinese president Xi Jinping scheduled for this evening.

It is a sensitive moment, amidst a full-blown trade war between the US and China. Donald Trump, the US president, has also threatened to turn his eye towards Germany’s large trade surplus.

“We hope that there will be a solution in the trade dispute with the United States since it affects everybody” in the world, Merkel told Chinese Premier Li Keqiang at Beijing’s Great Hall of the People during a two-day trip to China, according to Reuters.

One important factor in the trade war (potentially both a cause and a consequence) is the health of the US economy. We’ll get a vital health check later today, at 1:30pm BST, as the closely followed US non-farm payrolls jobs report come out.

Economists expect the US economy added 158,000 jobs during August, down from July. Keep a lookout for Trump tweeting in the aftermath – and pity Federal Reserve chair Jerome Powell, who has to talk in public this evening.

Powell has come under extraordinary pressure from Trump to cut interest rates to stimulate the economy. If the figures miss expectations then a repeat of Powell’s Jackson Hole speech – when Trump blew the Fed’s careful planning out of the water – might be on the cards.

The agenda

  • 8:30am BST: UK Halifax house price index (August)
  • 10am BST: Eurozone GDP growth third estimate (second quarter)
  • 11:30am: Russia central bank interest rate decision
  • 1:30pm: Canada unemployment (August)
  • 1:30pm: US non-farm payrolls jobs report (August)
  • 5:30pm: US Federal Reserve speech by Jerome Powell




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