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According to analysts at Nordea Markets, the news from the German manufacturing industry has been simply dreadful.

Key Quotes

“New manufacturing orders, as measured in terms of PMIs, have fallen to their lowest level since the global financial crisis and thus undershot even the Euro-area sovereign debt crisis lows. In the hard data, industrial production has so far recorded slightly better data, while the actual order data have been very weak.”

“The temporary factors that hit the German car industry, such as the new emission test standards, have faded. However, the rebound in production has been rather modest and risks remain to the downside, not least because of the threat of US car tariffs on EU cars. We thus do not expect rebounding car production to boost the German economy notably this year.”

“While the manufacturing industry is in recession, the rest of the economy is doing better. The services sector is still in growth territory and the same applies to construction. Overall, wages are still increasing, and employment is growing. While the weak manufacturing sector adds downside pressure on the economy as a whole, we do not expect the weakness to become serious enough to drag the entire economy into recession. Also a slight boost from easier fiscal policy should act as a buffer against recession.”

“This year will be very weak for the German economy, but growth will probably return to close to potential in 2020.”