German Industrial Production Unexpectedly Fell by 0.7% in November

Highlights

• German industrial production unexpectedly fell in November.
• Recent German economic indicators continue to threaten a euro area recession.
• Eurozone unemployment numbers are up next.

On Tuesday, the German economy was in the spotlight for the second session.

German Industrial Production

German industrial production unexpectedly declined by 0.7% in November after falling by 0.3% in October. Economists forecast industrial production to rise by 0.2%.

According to Destatis,

• Production in industry excluding energy and construction fell by 0.5%.
• Capital goods production declined by 0.7%, with consumer goods production falling by 0.1%.
• The production of intermediate goods decreased by 0.5%.
• However, outside the industrial sector, energy production surged by 3.9%, while construction slid by 2.9%.
• Industrial production was down 4.8% year-over-year in November compared with 3.4% in October.
• The three-month-on-three-month figures offered little comfort, falling 1.9% in the three months to November.

Euro Area Recession Risk Remains

The risk of a euro area recession lingered at the start of 2024. On Monday, the Sentix Indicator showed Germany still in recession, impacting the euro area economy. Recent German retail sales and factory orders were disappointing. However, German trade data offered a ray of hope. Nonetheless, the industrial production numbers aligned with the retail sales and factory order numbers.

EUR/USD Reaction to German Industrial Production

Before the German industrial production numbers, the EUR/USD rose to a high of $1.09664 before falling to a low of $1.09479.

However, in response to the numbers, the EUR/USD fell to a low of $1.09460 before rising to a high of $1.09529.

On Tuesday, the EUR/USD was up 0.02% to $1.09523.

Next Up

On Tuesday, Eurozone unemployment figures also need consideration. An unexpected rise in the unemployment rate could fuel fears of a Eurozone recession. Economists forecast the unemployment rate to remain unchanged at 6.5% in November.

US Economic Optimism and Trade

Later in the Tuesday session, sentiment toward the US economy and US trade data warrant investor attention. A pickup in economic optimism would align with market bets on a soft landing. Economists forecast the RCM/TIPP Economic Optimism Index to increase from 40 to 42 for January.

However, economists expect the US trade deficit to widen from $64.3 billion to $65.0 billion in November.

Beyond the numbers, central bank commentary also needs monitoring. FOMC member Michael Barr and the Bank of France Governor Villeroy de Galhau are on the calendar to speak. Comments relating to the economic outlook, inflation, and interest rates need consideration.