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German Industrial Production Tumbles

James Boston
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German Industrial Production Tumbles

There is further evidence of weakness in German manufacturing this morning with the publication of the August Industrial Production figures. The latest reading has plunged -4.0% on a month on month basis compared to a revised expansionary figure of 1.6% in July, expectations were for a softening today but only to around -1.5%. The non seasonally adjusted year on year figure has consequentially been dragged into negative territory for only the second time this year, at a reading of -2.8% it represents a sharp reversal from the July 2.7% posting, consensus was for a figure closer to 2.8% growth.

August is a typical holiday month in Germany and the lack of seasonal adjustment on the numbers mean that they are subject to excessive volatility in this month in particular. This goes part of the way to offering an explanation for this mornings weakness in the Industrial Production figures but the reality is that even allowing for the seasonality there is clear evidence of a real slowing in the Eurozone’s largest economy. Today’s figure represented the biggest one month fall since the economic crises began back in 2009 and even the government admitted this morning that the fundamental weakness in the sector was likely to result in ‘weak production for the quarter as a whole’.

Later today the International Monetary Fund (IMF) will release it’s latest World Economic Outlook report. There is mounting speculation that the German growth rate will be subject to a cut in it’s forecasted level. Der Spiegel reported on Sunday that the IMF will be cutting Germany’s GDP growth figure to 1.5% this year from it’s previous projection of 1.9%, if this is true it will represent a very significant downward revision of Germany’s economic prospects. According to the report the IMF will also be reducing the 2015 forecast for Germany from 1.7% to 1.5%.

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