German Industrial Production (Feb.)

The unexpected fall in industrial production in February means that German GDP will almost certainly have contracted in Q1. With severe restrictions likely to remain in place until well into the second quarter, a sustained recovery is unlikely until the second half of the year.
Andrew Kenningham Chief Europe Economist
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European Economics Update

Rising house prices strengthen ECB hawks’ case

Euro-zone inflation would be even further above target if owner-occupied housing costs were included in the region’s headline measure. Their formal inclusion won’t take place for a few years yet, but the ECB has pledged to take them into account in the meantime. On balance, this points to slightly tighter policy. Euro-zone Drop-In: Why the ECB will be laying the groundwork for rate hikes in 2023. Join Andrew Kenningham and the Europe team for a discussion about their Q1 euro-zone Economic Outlook report on Tuesday, 1 Feb at 09:00 EST/14:00 GMT. Registration here.

25 January 2022

European Data Response

German Ifo Survey (January)

The increase in the Ifo Business Climate Index (BCI) in January provides more evidence that, after contracting in late 2021, conditions have stabilised at the start of the year. With disruption from the Omicron wave likely to ease in the coming weeks, we think German GDP will increase in Q1. Euro-zone Drop-In: Why the ECB will be laying the groundwork for rate hikes in 2023. Join Andrew Kenningham and the Europe team for a discussion about their Q1 euro-zone Economic Outlook report on Tuesday, 1 Feb at 09:00 EST/14:00 GMT. Registration here.

25 January 2022

European Data Response

Euro-zone Flash PMIs (Jan.)

The small decline in the Composite PMI in January confirms that Omicron has taken a toll on the services sector, though Germany performed surprisingly well. We think governments will ease restrictions sufficiently in February and March to allow euro-zone GDP to increase by around 0.5% in Q1.

24 January 2022

More from Andrew Kenningham

European Economics Update

ECB’s new target marks death of Bundesbank tradition

If confirmed, the ECB’s decision to adopt a 2% inflation target and allow room to overshoot it if needed would mark a historic shift towards the mainstream for the ECB. It would have no immediate implications for monetary policy, but in the longer run may imply policy would be looser for longer.

8 July 2021

European Chart Book

Activity taking off as hospitality reopens

The economy has continued to rebound strongly as governments have lifted almost all restrictions on retail and restaurants and eased rules on foreign travel. Restaurant bookings are back above pre-pandemic levels and the number of flights is rising steeply (no pun intended!). This rebound is likely to put a bit more pressure on inflation, which looks set to resume its upward course in the second half of the year after pausing in June. The latest statements from key policymakers suggest that the ECB is in no hurry to scale back its asset purchases, but we think the Governing Council will begin to taper its bond-buying in the coming months.

7 July 2021

European Data Response

German Industrial Production (May)

The small decline in German industrial production in May, which left it well below its pre-pandemic level, was due to another big fall in vehicle production. The problems in that, admittedly important, sector are likely to be resolved only gradually, but otherwise the German economy is recovering strongly.

7 July 2021
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