German factory slump casts cloud over Europe’s economy

By BLOOMBERG

ZURICH • Germany’s industrial slump worsened at the start of 2019, dragging the euro-area economy into its worst performance in more than five years.

IHS Markit Ltd’s monthly index showed manufacturing in Germany shrank for the first time in four years.

In the euro-area it barely grew, and a broader measure of activity dropped to the weakest since 2013.

The euro fell after the disappointing numbers and was down 0.2% to US$1.1357 (RM4.70) as of 10:07am local time yesterday. Germany’s 10-year yield slipped two basis points to 0.21%.

The readings will reinforce fears about the health of both the European and the global economy. That’s been a key talking point at the World Economic Forum in Davos this week, where the International Monetary Fund cut its outlook and said an escalation of trade tensions could add further damage.

Those concerns will also play into the discussion among European Central Bank (ECB) policymakers, who met in Frankfurt yesterday. The ECB ended net bond buying last month.

While officials already indicated then that they wouldn’t start raising interest rates for some time, the deteriorating outlook suggests they may hold off even longer.

France also reported gloomy figures yesterday, with its composite measure of manufacturing and services dropping to the lowest in more than four years. The eurozone number fell to 50.7 from 51.1