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German industrial production disappoints in August - ING

FXStreet (Łódź) - Carsten Brzeski from ING remarks that the German Industrial Production numbers for August came in below expectations in August, dropping by 4% m/m and by 2.8% y/y.

Key quotes

"The August drop was driven by all sectors, with a sharp decrease of capital goods (-8.8% MoM) clearly standing out."

"Such a shocking number normally leads to two possible reactions: either an outcry of shock, or just denying the numbers due to monthly volatility or one-offs."

"Looking at the German numbers, the truth is probably somewhere in the middle. The sharp drop in August could at least be partly driven by the vacation period. However, the drop is too strong to explain it by one-offs."

"This means that increased uncertainty but also real slowing of the Eurozone economy, Eastern European economies and emerging markets are all currently taking their toll on the German economy."

"The short-term outlook for the economy is very diffuse as the strong labour market and solid private consumption should be able to, at least partly, offset weaker industrial activity."

"Whether this will be enough to avoid a technical recession, ie another contraction in the third quarter, is with today’s industrial production numbers too early to tell."

"Looking beyond the third quarter, the German industry is looking into a more difficult future. The safety net of inventories and orders at hand has narrowed in recent months. Inventory build-up combined with dropping new orders does not bode well for industrial production in the fourth quarter."

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