Industrial production for April disappoints
In Thursday's press conference last week Mario Draghi mentioned concerns about Germany explicitly. Friday's data points confirmed the concerns about Germany's slowdown with a series of poor data points. Germany April Industrial production fell -1.9% vs -0.5% m/m. Justin pointed out at the tine of the release that this was the biggest drop in monthly production since August 2015. Germany's trade balance for April was also hit with a reading of €17.9 billion vs €19.5 billion. The export figure for April was down -3.7% vs -0.9% m/m and that is signalling the global slow down German exporters increased their export levels to the UK in the first part of the year, but that is vulnerable now to the bullwhip effect. (Check out Justin's informative post on that effect here).
Now that the UK is due to leave the EU on October 31 we may see some more stockpiling, but that will only exarcebate the final come down for Germany when it happens. This may be significant for Germany going forward since they exported more to the UK than to China over this period. The Bundesbank finally conceded the slowdown and cut the German 2019 GDP forecast to 0.6% from 1.6%, but the slowdown is widely acknowledged by now. So, although wage gains in Germany are holding up and services PMI's are holding up, there will need to be a recovery in industrial production to really lift the economy back up. It is hard to see anything other than a resolution between the US and China providing the necessary conditions for that pick up.
