German industry casts a shadow on the European economy as a whole

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’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 percent to $1.1357 as of 10:07 a.m. Germany’s 10-year yield slipped two basis points to 0.21 percent. 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 IMF cut its outlook and said an escalation of trade tensions could add further damage.

The gauge for German manufacturing fell to 49.9 from 51.5. Readings below 50 indicate a contraction and forecasts were for it to be unchanged. New orders fell at the sharpest pace since 2012, with the auto industry and weaker demand in China cited. In brighter news, the measure for services rose, lifting the composite to 52.1, though that’s still only a two-month high. France also reported gloomy figures on Thursday, with its composite measure of manufacturing and services dropping to the lowest in more than four years. The euro-zone number fell to 50.7 from 51.1.

German Manufacturing Slump Casts Cloud Over Europe’s Economy, Bloomberg, Jan 24