German industrial recession worsens as trade uncertainty bites

Frankfurt: German industrial production unexpectedly declined further in July as trade tensions and waning business confidence continued to weigh on global demand.

Output fell 0.6 per cent from June, missing economist estimates for a slight gain. The numbers point to further deterioration in the outlook for Europe’s largest economy, with production down 4.2 per cent on the year and declining factory orders signalling that no turning point is in sight.

The US and China hit each other with a new round of import tariffs this month, the latest in a spiralling trade drama with grave consequences internationally. While officials from the world’s two largest economies have agreed to reconvene on trade in October, scepticism remains on both sides that substantive progress can be made.

The Eurozone has been mired in a manufacturing-led slowdown for more than a year, with Germany on the brink of recession.

“Industrial momentum remains weak,” the economy ministry said in a statement on Friday. In light of the soft start in the second half and the absence of a recovery in orders, no improvement in the industry trend is in sight.”

In July, investment-goods production and energy output slumped while consumer goods and construction improved.

The numbers come on the heels of a report on Thursday that showed factory orders plunged in July. The nation’s jobs market is still holding up though, with a separate report on Friday showing labour costs rose 0.8 per cent in the second quarter.

The European Central Bank’s Governing Council will meet next week to set monetary policy, with expectations for further cuts to interest rates and renewed asset purchases running high. A number of officials have expressed their opposition to the latter, raising the question of how forceful President Mario Draghi’s final stimulus push will be before his term ends in October.