FEAR over a possible recession is building in Germany after data released yesterday showed the nation’s industrial production plunged four per cent in August.
This was far below expectations and was largely caused by a decline in manufacturing, which fell 4.8 per cent month-on-month.
Germany looked to be in recovery at the start of the year, but shocked most economists when it posted negative real GDP growth between April and June. Since then, surveys such as the purchasing managers’ index, often used as a guide to GDP growth, have plunged. The currency union’s largest economy could now be in recession.
“The ministry of economics argue they expect a turn for the better as soon as uncertainty declines a little bit. In principle, we agree to this argument. However, survey indicators suggest that uncertainty actually remained high in September, too,” said Evelyn Herrmann, economist at investment bank BNP Paribas. “Long lasting high levels of uncertainty could imply that investment decisions are not only postponed, but cancelled,” she added.
Compounding Germany’s misery, the International Monetary Fund yesterday downgraded growth in the country to 1.4 per cent from 1.9 in 2014.