FX.co ★ German industrial output disappoints markets

According to Reuters, Germany’s industrial production dropped by 1.4% in September.

Such news discouraged traders. The fact is that a production slump in the eurozone may reflect an alarming situation in the global economy. At present, the whole world is concerned about geopolitical issues. However, everything could worsen in case of serious problems in the global economy. Nevertheless, experts recommend staying calm.

Estimates provided by Destatis unveiled that Germany’s industrial output shrank by 1.4%, exceeding the forecast. Economists had anticipated a decline of just 0.1%.

Notably, on a quarterly basis, industrial production showed even a more considerable decrease of 2.1%, reaching the level recorded during the period from April to June 2023. In August 2023, industrial production in the eurozone’s largest economy totaled 0.1% compared to July. According to initial estimates, the indicator should have fallen by 0.2%. Against this backdrop, currency strategists at ING suppose that by the end of 2023, Germany’s economy may face a technical recession. It is usually proclaimed after two consecutive quarters of contracting economic output. Recently, the likelihood of such a scenario has surged.

Earlier, economists at Destatis emphasized that Germany’s GDP dropped by 0.1% in the third quarter of this year. Such a dynamic could be explained by several factors, namely, a rise in the key interest rate, lower foreign demand, and soaring energy prices. Although the economy contracted insignificantly, the risk of a recession is estimated to be high. Business activity in the industrial sector is expected to recover only in late 2023–early 2024.