Grim December for EU’s top economies caps year of trade war

FRANKFURT AM MAIN (AFP) – Industrial production fell back sharply in both Germany and France last December, official data showed yesterday, closing off a year that saw trade conflicts above all weigh on the top European Union (EU) economies.

Manufacturing output was down 3.5 per cent month-on-month in Germany and 2.8 per cent in its western neighbour, data from Germany’s Destatis and France’s Insee statistics authorities showed.

In Germany, “there are very few positive elements to find in the December industrial data,” ING bank economist Carsten Brzeski said, adding that the figures point to Europe’s top economy shrinking in the fourth quarter.

The United States (US) and China last month signed a “phase one” trade deal designed to ease commercial tensions, whose knock-on effects last year battered European manufacturers.

But in the final months of last year, uncertainty was still widespread about whether the pact would ever be agreed after months of tough negotiations and successive rounds of tit-for-tat tariffs.

Throughout 2019, trade fears were cited by institutions like the European Central Bank (ECB) alongside Brexit and weakness in emerging economies as a top threat to growth in the euro single currency bloc.

German annual gross domestic product (GDP) growth slowed to 0.6 per cent year-on-year according to preliminary data, from 1.5 per cent in 2018, while France slowed from 1.7 to 1.2 per cent.

Both countries suffered one quarter of shrinkage last year, Germany in April-June and France in October-December.

Given trade tensions have abated and a disruptive no-deal Brexit has been avoided for now, some analysts had anticipated a rebound for European manufacturers in the new year.

Such hopes were boosted by brightening “soft” indicators like business sentiment surveys in Germany.

But last December’s fall “contradicts the widely held view that Germany’s manufacturing sector was beginning to recover at the end of last year,” Capital Economics analyst Andrew Kenning-ham commented.