Germany’s struggling factory sector delivered another dour headline on Thursday, underscoring the extent to which the world’s fourth largest economy remains mired in a deep manufacturing slump.
Factory orders fell 2.1% MoM in December, a bitterly disappointing result, as markets were looking for a 0.6% gain.
But it was the YoY figure that stuck out as particularly nasty. Factory orders plunged a ghastly 8.7% on year during the final month of 2019. That is the biggest decline since 2009.
December’s slump marked the 19th consecutive month of order book contraction.
Capital goods orders fell 3.9% MoM in December, while consumer goods orders fell 3.8%. Basic goods orders rose 1.4%.
ING called this a “horror show”. “Despite some tentative positive signs from soft data that point to a bottoming out of the manufacturing slump, the hard reality looks completely different”, the bank wrote Thursday, on the way to noting that “2019 was not only the worst year for industrial orders since 2008, it was also the first time since 2002 that German order books shrank for two years in a row”.
Germany’s manufacturing sector has been one of the highest profile casualties of the trade war. It’s also suffered from uncertainty surrounding Brexit. Unfortunately, Germany will almost surely take a fresh economic hit if China’s economy buckles under the weight of the Wuhan epidemic.
“No matter how the spread of the virus to Europe will evolve, the sheer impact on the Chinese economy will be enough to affect German industry and delay any rebound”, ING went on to say, reminding you that “the German automotive and engineering industries’ supply chains are well integrated and dependent on China”.
Fitch said Wednesday that if the coronavirus outbreak isn’t under control “well into” the second quarter, China’s economy could decelerate sharply on the way to posting growth of just 3% in Q1.
Preliminary calculations out last month showed German GDP grew just 0.6% in 2019, capping a decade of growth in uninspiring fashion. The annual average from 2008 to 2018 was 1.3%.
The first read on Q4 GDP is due on February 14. Data out late last month showed the rest of Europe stumbled in the fourth quarter. Berlin expects to eke out growth. We’ll see.
Keep in mind that Germany is posting these kinds of horrific manufacturing numbers while running a surplus.
