German industry is still far from stabilizing in November

by David Fleschen

German industry shrank again in November. However, the decline has weakened, said the British financial services provider IHS Markit in London. For example, the declines in production, new orders and employment were all milder than in the previous months. In addition, the business outlook of the manufacturers was again positive for the first time. Furthermore, the data show that the pressure on selling prices continues. This is mainly due to the sharp drop in purchase prices and the increasingly fierce competition for new orders. The seasonally adjusted IHS Markit / BME Purchasing Manager Index (EMI) climbed to 44.1 points in November from 42.1 in October. Although this is the best value since June, the EMI is still clearly in the red.

"The current EMI data shows a glimmer of hope. After all, the German PMI climbed to a five-month high in November, "emphasized BME Chief Executive Dr. Ing. Silvius Grobosch on Thursday in Eschborn. Nevertheless, it remains to be seen whether a trend reversal is already taking place or whether the weakness of the manufacturing sector is continuing.

"The EMI and the German economy are still struggling. As a result, there is a high likelihood that the new president of the European Central Bank, Christine Lagarde, will cut interest rates a little further into the negative zone as one of her first acts. " Gertrud R. Traud, chief economist of Helaba Landesbank Hessen-Thüringen, on Thursday at BME request the current EMI data. However, this should have been the case as the negative effects of this monetary policy became more and more apparent and the ECB, in its role on the supervisory board, increasingly pointed to this fact. "Not the monetary policy, but the trade policy of Trump and Xi or a ceasefire in the trade war should be the reason for a gradual stabilization of the world economy in the coming year," added the Helaba Bank Director.

"Overall, we have managed to escape a technical recession, thanks in large measure to the increasing consumption of private households and the public sector. But this is not the all-clear because, as the numbers show, the industrial sector is still going strong. " Ulrich Kater, chief economist of DekaBank, on Thursday the BME.

"The second improvement in a row is a sign of hope for German industry. Although the business outlook for industrial companies is slightly positive for the first time in five months, the overall situation remains tense, "said Katharina Huhn, head of the Business Unit Growth, Enterprise Surveys at the DIHK, on ​​Thursday at the BME. An end to foreign trade challenges is currently not in sight. This presses on the heavily export-oriented German economy. The competition for new orders remains tough and production here in Germany is falling due to the declining order situation. As many German companies as never before since the last economic and financial crisis call the sluggish foreign demand in the current DIHK survey as a risk for the future business development. "In view of the structural challenges facing the German economy, we must work intensively on sustainable improvements to our location. Here priorities must be set. An important signal would be an internationally competitive corporate tax burden of no more than 25 percent ", emphasized the DIHK economic expert in her statement for the BME.

On the recent development of the EMI sub-index purchase prices, Dr. Ing. Heinz-Jürgen Büchner, Managing Director of Industrials, Automotive & Services at IKB Deutsche Industriebank AG, told BME on Thursday: "Despite the first signs of an economic recovery after the turn of the year, commodity prices are still in their basement. However, there are also indications of upward shifts, even in the steel sector. As a result of scarce availability, German steel scrap prices rose by around ten percent as early as November 2019. In the North American market, prices for rolled steel increased at the beginning of last month; The Chinese domestic market followed in the next weeks of November. This could also signal the European price level. However, we do not see any lasting recovery until the first quarter of 2020. "
Source: BME, Photo: Fotolia

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