Germany’s industry shock raises spectre of recession

FRANKFURT • A dramatic plunge in German industrial activity late last year raised the risk that Europe’s largest economy will slip into recession.

Production fell for a third month in November and posted its worst year-on-year drop since the end of the financial crisis, with weakness in everything from consumer goods to energy. A slump in Germany has repercussions for the euro-area, where separate numbers yesterday showed economic confidence has fallen to the lowest in almost two years.

It’s another headache for European Central Bank president Mario Draghi, who last month said the 19-nation economy has enough underlying momentum to justify a decision to stop adding monetary stimulus.

The German numbers, while volatile, follow a bigger than expected decline in factory orders. That’s sparked recession talk among investors and economists already fretting about slower global momentum.

Germany’s central bank said yesterday it’s “looking through the volatility of monthly economic data” and doesn’t comment on individual indicators. It has long been expecting a rebound from a third-quarter contraction, arguing that temporary challenges are about to subside.

Now, it seems some of those hurdles will take longer to overcome, potentially putting the economy on track for yet quarter of shrinking output.

Economists still see some hope that the situation in Germany could improve. ING said private and public consumption have the potential to offset recession forces, and orderbooks look healthy. — Bloomberg