The Eurozone's Industry Is Crumbling And Germany Is Signaling Recession

The German government just cut its economy’s 2014 GDP growth forecast to 1.2% from 1.8% and 2015 forecast to 1.3% from 2%.

This follows more awful figures from the Eurozone: industrial production dropped 1.9% in the year to August. Economists had expected a 1.6% drop between July and August, but got a steeper 1.8% decline.

A lot of that is driven by Germany’s abysmal industrial figures. The powerhouse economy recorded a 4% drop between July and August.

“Even if production rebounds in September – quite likely given the partly calendar-related weakness of German data — the euro area’s industrial sector may well be back in recession following a small quarterly contraction in the second quarter,” said Robert Kuenzel of Daiwa Capital Markets in a note this morning.

The performance of Europe’s industrial sector is so awful that output levels are now below where they were four years ago, and more than a tenth lower than their pre-financial crisis highs:

Germany’s ZEW index of economic sentiment also just came out, and it’s in negative territory for the first time since 2012. At -3.6 in October, German investors are now more bearish than they are positive for the first time in nearly two years.

We’ve already had some worrying data out this morning: French inflation dropped to 0.4% in September, a five year low, and Spain’s figure came in at -0.3%, the third straight month of deflation.

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