Gloom thickens over Eurozone economy as German factory orders tumble


German recession fears have been pushed up a notch after factory orders plunged by more than expected in August, continuing the economy’s dire 2019.

Read more: Eurozone recession risk ‘very real’ with services close to stagnation

New orders from German factories fell by 6.7 per cent in the year to August, Germany’s statistics body said today. This was down from a five per cent fall in July and well below economists’ predictions of a 4.6 per cent drop.

The month on month change in factory orders beat expectations in August, however, falling 0.6 per cent compared to an expected 1.5 per cent fall.

The weak reading came at the same time as a survey showed investor confidence in the Eurozone fell to its lowest level in more than six years in October.

Research group Sentix’s investment sentiment index fell to minus 16.8 this month from minus 11.1 in September, undershooting a forecast of minus 13.

“There hasn’t been a positive reaction to the support measures taken by central banks,” which have loosened monetary policy to try to boost growth, Sentix managing director Patrick Hussy said.

Germany has been the zone’s worst-performing large economy. This trend continued in August, with demand for capital goods down 1.6 per cent month on month from the factories that have traditionally driven the bloc’s growth.

Joshua Mahony, senior market analyst at online trader IG, said the figures were “yet another reminder that we are likely on the cusp of the first recession since the 2008 financial crisis”.

He said the prospect of a “US-EU trade war” could further hurt Germany’s economy.

Last week the World Trade Organization (WTO) ruled that the US can slap punitive tariffs on $7.5bn (£6.1bn) worth of goods from the European Union over illegal subsidies to Airbus.

Europe’s banks should also be worried by a maturing business cycle that could soon turn into a recession, the European Central Bank (ECB) said today.

The ECB said banks’ previous forecasts could have overestimated their performance in their last round of forecasts.

Read more: ‘We had to respond’: ECB defends move to splash cash in Eurozone

“The macro-financial environment has worsened in the period since these projections were prepared, and banks may have not fully incorporated the effects of competition into their estimates,” the ECB’s bank supervision arm said.

(Image credit: Getty)

Published by
Harry Robertson