Mere hours after German Economy Minister Peter Altmaier assured the German public that the country’s economy will continue to expand despite a recent raft of discouraging economic data, official data – unlike the US, Germany’s government is open and economic data continue to be reported – showed German industrial activity plunged the most since 2009, confirming a weak factory orders print from Monday and sparking fresh fears that Europe’s largest economy may have entered a recession during Q4 just as Mario Draghi was preparing to end the ECB’s purchases of government bonds.
According to Bloomberg, industrial production fell for a third month in November (-1.9% m/m, and -4.9% y/y) with weakness in everything from consumer goods to energy. In another warning sign for the bloc, the data was released alongside a eurozone-wide sentiment reading which showed that economic confidence had slumped late last year.
The dismal IP reading confirmed a just as ugly German factory orders print from Monday which tumbled far more than expected in November. Orders slid 1% from October, and posted a year-on-year decline of 4.3%, the biggest drop in more than six years
The data raise the possibility that while European Central Bank President Mario Draghi was assuring investors in December that the Continent’s economy had enough momentum to justify tapering the central bank’s asset purchases, its largest constituent may have been sliding into a recession.
For what it’s worth, Germany’s central bank said Tuesday it’s “looking through the volatility of monthly economic data” and wouldn’t comment on individual reports. The bank has been hoping for a rebound from the German economy’s Q3 contraction, arguing that the shrinkage was due to temporary factors like new auto emissions rules.
One economist said that even if the German economy manages to avoid a recession, it’s looking likely that industrial output probably contracted in the fourth quarter.
“The latest data, even assuming a bounce back in December, mean industrial output probably contracted in the fourth quarter. The decline is big enough to have a meaningful impact on GDP growth, and creates a risk that the economy shrank again.”
But in a reflection of the bad-news-is-good-news dynamic that reasserted itself in the US on Monday, German stocks rallied on the news, while German bund yields climbed but soon pared their move.