Socialism has Failed Germany

Socialism has Failed Germany

Industrial production in European powerhouse Germany fell back in June, official data showed Wednesday, adding to a picture of a eurozone suffering from trade wars and global uncertainty.

Output at producer firms shed 1.5 percent in June from the previous month, federal statistics authority Destatis said in figures adjusted for seasonal and calendar effects, after a 0.1-percent increase in May.

The fall was much sharper than the 0.6 percent predicted by analysts surveyed by Factset.

Compared with June 2018, production was dramatically lower as well, losing 5.2 percent.

“The business cycle in industry remains in a downturn,” the economy ministry in Berlin said in a statement, noting that production fell 1.8 percent across the whole second quarter.

“Metal production, machine-tool making and carmaking contributed especially to the retreat,” the government economists said.

Looking in more detail at June’s results, a breakdown showed that output of capital goods, producer goods and consumer goods all fell back, with producer goods firms the worst hit.

Energy output was also down, while construction expanded slightly thanks to good weather.

There was a hint of positivity in June’s industrial orders, a forward-looking indicator that rose unexpectedly in data released Tuesday.

But “German industry continues to suffer from structural changes and ongoing trade conflicts,” ING bank economist Carsten Brzeski commented.

Rather than being limited by shortages of skilled workers and equipment as last year, demand is now the crunch factor on output.

“The combination of high inventories and few orders at hand does not bode well for industrial production in the months to come,” Brzeski said.

“Add to this a further escalation of the current trade conflicts, Brexit and an ongoing structural transformation in the automotive sector and the outlook doesn’t look any better.”

Top of businesses’ concerns this week will be the US’ new round of $300 billion in tariffs on Chinese goods, which hammered the Frankfurt DAX index of blue-chip shares along with markets worldwide.

The move means the trade war’s knock-on effects for Germany — a major exporter to China — appear set to remain in place for now.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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