German industrial production fell in September at its sharpest rate since February 2009. On a monthly basis, industrial production fell by 2.7% M/M, while a decline by 0.9% M/M was expected. The previous figure was however upwardly revised from - 1.0% M/M to -0.4% M/M. The breakdown shows that weakness was led by the manufacturing sector (-3.0% M/M), but production dropped also in energy (-0.7% M/M) and in the construction sector (-0.8% M/M). Within the manufacturing sector, production of capital (-4.7% M/M) and intermediate (-2.8% M/M) goods fell sharply, while production of consumer goods rose by 1.1% M/M. Last week, also the order data showed a bleak outlook as orders dropped significantly already for a third straight month. While some added that the figures might have been distorted due to special factors, there is no reason to doubt that the German economy is cooling down dramatically and will even go through a “mild recession” at the end of the year and early next year.
In September, euro
zone retail sales dropped for the first time in four months. On a monthly basis, retail sales fell by 0.7% M/M, while only a slight decline was expected (by 0.1% M/M). The figures of the previous month were upwardly revised from -0.3% M/M to 0.1% M/M. The details show that softness was mainly based in non-food products (-0.8% M/M), while sales of food, drink and tobacco stabilized in September. National data show that retail sales were fragile in Portugal (-3.7% M/M), Spain (-1.7% M/M), France (-0.6% M/M) and Ireland (-0.3% M/M), while they rose slightly in Germany (0.4% M/M) and Belgium (0.1% M/M). There were no data available from Greece and Italy. During the summer months, retail sales held up relatively well, but consumers are now cutting back spending as fiscal tightening and high inflation and weighing on consumers’ budgets. Also the uncertainty and bleak economic outlook are weighing on consumer behaviour.