Softer German softer Ifo survey for August followed by a notable drop in the services PMI to a three-year low in the same month suggest loss of momentum in Germany’s economy. And the latest significantly weaker-than-expected industrial production data suggest that the risks are clearly to the downside for German Q3 GDP.
Data released on Wednesday showed German industrial production posted its steepest fall in 23 months in July. Lower demand from emerging markets such as China and worry about the consequences of Britain’s decision to leave the EU are weighing on Germany's exports.
Industrial output fell by 1.5 percent on the month, the data showed, confounding the consensus forecast in a Reuters poll for an increase of 0.2 percent. A 1.8 percent rise in output in the construction sector and a surge of 2.6 percent in energy output were not enough to offset a 2.3 percent fall in manufacturing, the data showed.
“We continue to expect consumption to maintain broadly stable GDP growth in Germany in the third quarter close to the recent trend. Nevertheless, the softening business sector surveys coupled with the weak figures from the industrial sector suggest that the risks are clearly to the downside,” said Daiwa Capital Markets Research in a report.
