German car output skids

Source:Reuters-Global Times Published: 2019/3/14 18:33:43

Auto and tech companies call for unified and simpler federal rules to support the industry

Main: An employee assembles a Mercedes-Benz E-Class vehicle on the production line of a factory in Bogor, Indonesia. File photo: VCG

Left: A modular electrification Toolkit modular chassis platform for electric cars on display at an exhibition hall in Wolfsburg, Germany in March. Photo: VCG

Far left: A booth of Mercedes-Benz at an exhibition center in Shanghai. File photo: VCG


Plunging car production drove an unexpected decline in industrial output in Germany in January and an industry body cut its 2019 growth forecast, adding to signs that trade tensions and unease about Brexit are weighing on Europe's largest economy.

A global slowdown, tariff disputes sparked by US President Donald Trump's "America First" policies and the British departure from the EU threaten to bring a decade-long expansion in export-reliant Germany to an end. 

The same factors are affecting the rest of the EU.

"Industrial production is hard data and it is really cementing the impression that the European economy is slowing down," said Mizuho rates strategist Antoine Bouvet. "It is lending credibility to the view that the slowdown is not temporary."

Germany's BDI industry association cut its 2019 economic growth forecast to 1.2 percent from 1.5 percent.

"The economy is continuing to lose momentum, mainly for reasons related to the external environment," BDI Managing Director Joachim Lang said. 

"Disruptions in trade with Britain or the US could bring us dangerously close to zero growth."

German business daily Handelsblatt said on Monday that the federal government had cut its in-house GDP growth outlook to 0.8 percent from 1.0 percent, the second reduction in less than two months.

The Economy Ministry and the Finance Ministry declined to comment. The government is expected to update its forecast in April.

Gathering clouds

Industrial output dropped 0.8 percent in January, well below market expectations for a rise of 0.5 percent, Germany's Statistics Office said.

The figure for December was revised up, however, to a 0.8 percent increase from a previously reported 0.4 percent drop, and the euro recovered ground after a brief dip.

Automobile production fell by 9.2 percent on the month in January, separate figures from the Economy Ministry showed. It blamed special factors such as strikes at suppliers and a switch to new brands.

German carmakers are also at the sharp end of a sectoral dip driven by a slowdown in China, a plunge in demand for diesel vehicles and costly investments in electric and autonomous cars.

"The headwinds from abroad are hitting the German economy particularly hard," Sophia Krietenbrink from the DIHK Chambers of Industry and Commerce said.

Seasonally adjusted exports were flat month-on-month in January, compared with a forecast 0.5 percent contraction, while imports rose 1.5 percent, the data showed.  

The unexpectedly weak figures suggested the German economy is likely to post only meager growth in the first quarter after it barely avoided a recession, defined as two consecutive quarters of contraction, in the second half of last year.

The slowing economy means tax revenues are likely to be lower than expected this year, which could increase tensions in Chancellor Angela Merkel's governing coalition over spending priorities.

ING economist Carsten Brzeski said that the sharp revisions of monthly data, stabilizing domestic orders and solid fundamentals suggested the industrial slowdown was reaching its low point. "But if the search for a bottom takes too long, the German government should start considering additional fiscal stimulus." 


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