Just when you thought - based on all the talking heads and administration officials constant jawboning - that it was safe to buy stocks because global growth was troughing, Germany's auto sector has to spoil the party.
Thanks to a 5.4% MoM plunge in auto production in October, German Industrial output fell 1.7% in October, that’s the steepest since April and compared with estimates for a 0.1% gain. This unexpected drop sent industrial output down 5.3% YoY - the biggest drop since November 2009.
Additionally, a new source of weakness has also emerged, with production of capital goods excluding cars now down 5.9% on its August level.
As Bloomberg notes, this means the sector is starting the fourth quarter on a very weak footing and could again place a heavy burden on the economy in 4Q. The weakness also adds downside risk to forecasts for manufacturing to stabilize this quarter (weighing down on GDP growth in 4Q by 0.59ppt).
It would appear that the damage U.S.-China trade tensions and Brexit uncertainty have done to the economy that once was Europe’s powerhouse remains high, as German factory orders also unexpectedly slipped in October amid weak demand for investment goods within the country and outside the 19-nation euro area, and business confidence - while stabilizing - remains subdued.
The Economy Ministry acknowledged on Friday that industrial momentum is weak, but also offered a more optimistic take on the outlook. “Recent developments in orders and business expectations signal that a stabilization trend could take hold in the coming months,” it said.