German Industrial Production Plunges

German industrial production dropped 4% from July to August, versus an expected decline of 1.5%. This is the biggest month-on-month drop in five years. The figure represents a 2.8% drop on the same month last year.

Similarly ugly numbers on factory orders released on Monday and the worrying business reports suggest the sector is in decline.

We don’t yet have a full quarter’s data but Claus Vistesen at Pantheon Macroeconomics is already calling it: “The German manufacturing sector is in a recession.”

“The weakness in industrial production has now significantly increased the probability that German GDP failed to grow at all in the third quarter,” added Chris Scicluna of Daiwa Capital Markets in a note.

There are factors to consider here: Largely the impact of summer holidays in Europe. But even if Germany’s industrial growth isn’t going rapidly into reverse, it’s stalled at best.

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