Friday 6 September 2019 11:32 am

Germany flounders on the brink of recession

Germany stands on the edge of falling into recession, as industrial output fell again in July, according to figures released today.

Economic data on factories showed production fell 0.6 per cent in July, better than June’s 1.1 per cent drop but worse than a Reuters poll predicting a rise of 0.3 per cent.

Read more: Demand proves weak for Germany’s 30-year bonds offering negative yields

Destatis’ statistics also revealed output declined 4.2 per cent compared to July 2018.

“German economic data continues to flounder,” Josh Mahony, a senior market analyst at IG, said.

“Industrial production remain[s] in contraction just a day after factory orders slumped into the second lowest rate of decline seen over the past year.”

There were few signs of any short term recovery, he added, as a global economic slowdown and the US-China trade war hit UK industrial activity too.

 Mario Draghi’s European Central Bank (ECB) stands poised to start a fresh round of quantitative easing in a bid to prop up the Eurozone.

But Mahony warned that further cash injections will deliver diminishing returns.

“With rates already rock bottom and the bank having only recently embarked on a bout of QE, we are likely to see diminishing returns from any ECB action,” he said.

Wealth boutique Henderson Rowe added that the latest drops build on “recession-like” sector activity data from a fortnight ago.

“[It] further confirms that Europe’s biggest economy is already in cyclical decline,” head of research  Artur Baluszynski said.

“Global trade tensions and Brexit have now started feeding through to Eurozone GDP numbers and other lagging indicators.

Read more: Eurozone beats output expectations for August but economy remains weak

“The tricky thing about recessions and how financial markets and investors react to them is that we only know that it happened once we are already in one. We might already be in a global recession we just don’t know it yet.”