Euro Dollar Declines On Weak German Industrial Production Data

February 7, 2019
Euro Dollar Declines On Weak German Industrial Production Data February 8, 2019 Lennox Hamilton


Industrial production fell to a seasonally adjusted 0.4% since November, when it fell by 1.3 percent, the Federal Statistical Office’s preliminary figures showed Thursday.

Economists expected an increase of 0.8% in December. The decline in November was revised from 1.9% initially reported.

In December, Germany’s industrial production declined unexpectedly for the fourth consecutive month, dragged down by a construction slump, raising doubts about a possible short-term rebound. The EUR / USD pair has fallen from a high of 1.1450 to a low of 1.1330, following poor data releases.

The economy ministry said

In view of declining order intake and subdued sentiment indicators, the industrial economy is likely to continue to develop subdued.

Data released on Wednesday showed that factory orders declined unexpectedly for a second month in December and at a faster pace, due to weak foreign demand.

With the exception of major bookings, factory orders increased by 3.5% from the previous month, indicating that the current situation was not so depressing.

Production of energy remained unchanged from the previous month, while construction output decreased by 4.1%. Despite order books remaining robust, mainly due to severe bad weather, the slowdown in construction continued in January, survey results from IHS Markit showed on Wednesday.

According to the survey, construction growth slowed down to three in January, leading to the worst decline in commercial activity in nearly six years. The latest survey of IHS Markit purchasing managers showed that the manufacturing sector decreased in January, marking the lowest level in 50 months.

With the exception of energy and construction, production increased by 0.2% compared to the previous month following a 1.5% drop in November. The output of capital goods increased by 0.9%, while intermediate goods production decreased by 0.4% and the output of consumer goods fell by 0.5%.

Output from the automotive sector jumped 7.2%, the Ministry of Economy noted. Industrial production fell 1.5% year-on-year in the fourth quarter of 2018 in the midst of contractions in industry and construction, the ministry added.

Industrial production decreased by 3.9% year-on-year after a 4% decline in November, revised from 4.7%. Economists expected a 3.3% reduction. Production fell for a second month in a row after a 0.5 percent increase in October.

Commenting on the economic data, Commerzbank economist Ralph Solveen said

Manufacturing still does not present itself in a good condition. Nevertheless, the German economy is likely to have grown slightly in the fourth quarter.

Germany probably avoided a fourth-quarter technical recession, the economy ministry said. Annual average growth slowed to a low of 1.5% in 2018 for five years.

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