Industrial production plunged by -1.9 percent in November
Germany is on the verge of entering a recession after suffering a collapse in industrial production, according to reports.
Traders were shocked when they saw the German economy plummet sharply than anticipated.
Industrial production plunged by -1.9 percent in November – a year-on-year low of -4.6 percent stoking the uncertainty in the world’s fourth-largest economy.
If Germany does fall into recession, it could have a disastrous impact on the already delicate Greek and Italian economies.
‘Yesterday’s manufacturing data in Germany provided alarming evidence of a much more severe slowdown in the second half of last year than economists had initially expected.’ Claus Vistesen of Pantheon Macroeconomics told Business Insider.
He added that a ‘perfect storm across all sectors’ has shaken the economy.
The collapse was so sudden that Vitesen informed his clients he believed the data was inaccurate.
Germany faces the lowest industrial production since 2008, and a recession was now likely, Stefan Schilbe of HSBC told Business Insider.
Evidence suggests that the eurozone recovery lost more momentum than expected at the end of 2018, most notably in Germany.
Unemployment across the eurozone has been plummeting from a peak of 12.1 percent in 2013 as the region battled to regrow following the global financial crisis.
According to the DailyMail: However, ongoing worries about the level of government debt in some countries kept unemployment high, such as in Greece and Spain.
R&D intensity above 3% in 🇸🇪 Sweden (3.33%), 🇦🇹 Austria (3.16%), 🇩🇪 Germany (3.06%) and 🇩🇰 Denmark (3.02%)
— EU_Eurostat (@EU_Eurostat) January 10, 2019
Since the German economy contracted by a quarterly rate of 0.2 percent in the third quarter of 2018 largely as a result of one-time factors related to new car emissions standards.
Another decline in the fourth-quarter fall would mean Germany will have entered a recession, described as two straight quarters of negative output.
Still, unemployment continues to be remarkably low in Germany at 3.3 percent, in sharp contrast to the rates still seen in those economies that were at the forefront of the euro zone’s debt crisis.
Greece’s unemployment rate, though sharply down from its peak, was still 18.6 percent in September.
There are other clouds beyond Germany hanging over the eurozone economy at the start of the new year.
France, the eurozone’s second-largest economy, is also facing difficulties.
The country’s statistics agency INSEE revealed Wednesday that consumer confidence plunged in December to a four-year low largely as a result of the yellow vest protests that brought much of France, but particularly Paris, to its knees in the crucial Christmas trading period.
Also, trade tensions between the U.S. and China have the potential to further weigh on a softer global economy while Britain’s imminent exit from the EU could be another negative hit especially if the country drops out of the bloc without a deal to even its transition to new trading arrangements.
France and Germany are set to develop a shared defense, economic and foreign policies as part of a “twinning” pact which is considered as a prototype for the destiny of the European Union.
President Macron and Angela Merkel are set to sign a treaty in January that will pave the way for exhibiting a united diplomatic front and work together in ‘peacekeeping’ missions.