German Growth Sinks Into Negative As Trade War Hits Exports

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    Helmholtz Watson

    The German economy is faltering as we have…



    [color=red][b]European equity closed lower again

    French CAC -0.4%
    German DAX -0.6%
    Italy MIB – closed for Assumption Day
    Spain IBEX -0.3%
    UK FTSE 100 -1.3%

    Helmholtz Watson

    Bundesbank monthly report

    Risk of the German economy entering a recession
    Euro area economy growing at a subdued pace in Q3
    Sees first signs of downturn in the labor market
    German economic outlook remains unclear, hinges on exports
    Economic activity could shrink over the summer (Q3) due to weak industrial activity
    It is unclear if exports will regain their footing before the domestic economy becomes more severely affected
    Given the way things are going, another economic contraction wouldn’t be surprising.

    Helmholtz Watson

    Germany’s Zew indicator of economic sentiment lowest level since the great recession.

    Helmholtz Watson

    Some positive news out of Germany

    September IHS Markit construction PMI 50.1 vs 46.3 prior 62-month low of 46.3.

    The first expansion in construction activity since May, as housing activity returned to growth and both commercial and civil engineering activity contracted at a softer pace.

    New orders fell softer in September and job creation growth picked up.

    On the price front, input price inflation eased for the seventh time in the past eight months to the weakest since February 2016; while output prices rose more sharply, with the rate of increase reaching the highest since April.

    Finally, expectations remained slightly negative and close to August’s 46-month low, amid worries about the impact of the manufacturing downturn on prospects for commercial activity. Construction Pmi in Germany is reported by Markit Economics.

    The good news is that this is a pickup after two back to back declines . However this a minor data point and sentiment still remains soft going forward for the German economy which looks to be in recession.


    [size=5][color=red][b]Germany August factory orders -0.6%v -0.3%m/m
    prior -2.7% revised to -2.1%[/b][/color][/size]

    Factory orders WDA- 6.7% v -6.4% expected
    -5.6% prior revised -5.0%

    Decline mainly due to a 2.6 percent fall in domestic demand, while foreign orders grew 0.9 percent, boosted by demand from both the Euro area (1.5 percent) and other countries (0.4 percent).

    By category, demand decreased for both capital (-1.6 percent) and consumer goods (-0.9 percent), but rose for intermediate goods (1.1 percent).

    Factory Orders in Germany averaged 0.35 percent from 1952 until 2019, reaching an all time high of 27.10 percent in June of 1975 and a record low of -15.70 percent in July of 1975.


    ECB Mersche speaking in Luxembourg

    Risks to growth outlook remain on the downside
    Likelihood of deflation is limited
    Better policy mix can help ECB to achieve goal faster
    The longer the weakness in manufacturing process, the greater the risk that other sectors of the economy will be affected
    Likelihood of deflation remains limited, market expectations of inflation over the medium-term are settling around the values that are not consistent with our inflation aim.


    Germany Deflation as October PPI -0.2% vs 0.0% m/m expected Prior +0.1%, now weakest pace since September 2016.

    – released by Destatis – 20 November 2019

    PPI -0.6% vs -0.4% y/y expected Prior -0.1%

    Producer Prices in Germany averaged 63.54 Index Points from 1950 until 2019, reaching an all time high of 105.40 Index Points in April of 2019 and a record low of 25.50 Index Points in June of 1950.

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