--German industrial production declined 1.7% in October, missing expectations for a rebound

--Weak industrial production raises questions on the potential of a technical recession in Germany

--Despite the disappointing data, UniCredit sees some signs of hope for manufacturing

 
   By Maria Martinez 
 

German industrial production slipped further in October, defying expectations for a rebound and raising concerns about overall economic growth in the fourth quarter.

Federal Statistics Office Destatis said Friday that total industrial output--comprised of output in manufacturing, energy and construction--fell 1.7% in October from September, in calendar-adjusted terms. Economists had forecast a 0.2% increase, according to a poll by The Wall Street Journal.

The data, which follows news of a drop in German manufacturing orders a day ago, indicates that Germany's industrial recession may be worsening, said Capital Economics' Chief Europe Economist Andrew Kenningham.

"The sharp decline in production in October suggests that, far from bottoming out, Germany's industrial recession may be getting worse," Mr. Kenningham said, adding that a recession in Germany is still more likely than not in the coming quarters.

Compared with October 2018, total industrial output fell 5.3% in calendar-adjusted terms, Destatis said. On a monthly basis, construction output dropped 2.8% in October, while manufacturing output slid 1.7%.

Destatis data in late November showed that Germany's economy eked out a gain in the third quarter, with gross domestic product growing 0.1%, reversing a 0.2% decline in the second quarter. Third-quarter growth allayed fears of a technical recession, but the economy remains on shaky ground.

In a tweet, Oxford Economics' Chief German Economist Oliver Rakau called Friday's fall in industrial production "disastrous." The 1.7% slide in output marks a new cyclical low, he said, and "is likely to push fourth-quarter GDP trackers into negative territory."

Nevertheless, Mr. Rakau said that while the risks of a GDP contraction in the last quarter have risen, it is too early to say anything definitive considering the usual volatility in German data.

At UniCredit, Chief German Economist Andreas Rees said he sees some signs of hope for manufacturing, such as the stabilization of foreign new orders excluding big-ticket items and the recovery of the new-orders-to-inventories ratio in the manufacturing purchasing managers' index.

"Domestic demand is likely to be robust enough to keep the overall German economy afloat," Mr. Rees said.

Write to Maria Martinez at maria.martinez@wsj.com

(END) Dow Jones Newswires

December 06, 2019 05:39 ET (10:39 GMT)

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