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German industrial production shrank unexpectedly in January

German industrial production

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German industrial production shrank unexpectedly in January, with manufacturing of capital goods declining by 2.5%. Thus, the latest official data on the largest economy in Europe shows that grim sentiment is on the rise.

Industrial production in the first month of the year decreased by 0.8% compared to December, while excluding energy and construction data, the decline was 1.2%. The economists predicted growth by 0.5%. On an annual basis, industrial production registered a decrease of 3.3%.

The December data, however, was revised upwards to an increase of 0.8% at an initial decline of 0.4%.

Intermediate goods production in Germany decreased by 0.5% on a monthly basis and consumer goods by 1.5%. Apart from the general data, energy production increased by 3.6% in January, while construction expanded by 0.2%.

At the end of last week, Germany’s factory orders reported an unexpected decline in January. Orders declined by 2.6% on a monthly basis, which is the biggest decline since mid-last year, according to preliminary data from the Federal Statistical Office. At the same time, the expectations were for growth of 0.5%. In January, the decline was due to the weak demand for investment goods, especially outside the Eurozone.

The European Central Bank last week announced the revival of the lending program against a backdrop of growing concern over the region’s economy. The German economy, however, managed to avoid the recession at the end of last year, after the GDP declined by 0.2% in the third quarter.

Germany’s dependence on exports makes it particularly vulnerable to trade disputes between the US and China, and the US and the European Union.