(06 September 2019) DAILY MARKET BRIEF 2：German economic data disappoints, once again
The last batch of economic data from Germany points towards further pain. July’s industrial production came in well below
estimates this morning. The gauge contracted 0.6%m/m while market participants expected a monthly increase of 0.4%. On the bright side,
the June’s 1.5% contraction was upwardly revised to -1.1%. Recession risks for Europe’s largest economy have risen sharply over the last
few months as bad economic data has been piling up. In July, factory orders dropped 2.7%m/m, retail sales contracted 2.2%m/m while
manufacturing PMI nosedived to 43.5 in the month of August.
According to the latest data, it looks like the 0.1%q/q contraction GDP growth in the second quarter was just a foretaste of what is to happen in
the third quarter. Indeed, there is a substantial risk that the manufacturing weakness spreads to the whole economy, which would weigh on
the service sector and ultimately affect negatively job creation over the medium term. Unfortunately, the auto industry, Germany’s
leading sector, is not out of the wood yet as the US/China trade war together with a global slowdown of that industry would not be resolved in
the coming months. Expect further pain for Europe’s leading economy.
By Arnaud Masset
