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| German recession fears grow as factory orders tumble - business live | German recession fears grow as factory orders tumble - business live |
| (35 minutes later) | |
| Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, has now weighed in on this morning’s dire German factory orders. | |
| He says the 1.6% month-on-month decline was a “nasty headline”, adding: | |
| “Across sectors, weakness in capital and intermediate goods were the primary drivers, especially on the export side to non-eurozone countries. By contrast, new orders for consumer goods rebounded strongly across the board, pointing to a revival in the auto sector towards the end of the year. | |
| “The year-over-year rate was depressed by base effects from a very strong finish to the year in 2017, but the message remains clear: German manufacturing is suffering.” | |
| Europe’s competition authorities have just derailed a massive planned merger between trainmakers Alstom and Siemens, triggering a massive political row. | |
| Antitrust commissioner Margrethe Vestager has ruled that allowing France’s Alstom and Germany’s Siemens to combine would have created a near monopoly in the European train-making market. | |
| This, she fears, would have hampered competition and driven prices up, so she’s pulled the emergency cord and brought the deal to a sudden halt. | |
| We need signalling systems to keep us safe & very high speed trains for climate friendly transport. @SiemensMobility and @Alstom are champions in rail industry. Without remedies the merger would have resulted in higher prices, less choice & innovation, so the merger is blocked. | |
| Announcing the decision, Vestager says: | |
| “The Commission prohibited the merger because the companies were not willing to address our serious competition concerns.” | |
| Alstrom makes trains for France’s high-speed TGV service, while Siemens ICE-4 ,models are used on Germany’s own high-speed network. The two companies had hoped to create a new European powerhouse that could have competed better on the world stage against rivals such as China’s CRRC. | |
| French finance minister Bruno Le Maire has alreay blasted the move, claiming it was a serious political and economic mistake, adding: | |
| “It’s going to serve China’s economic and industrial interests.” | |
| If so, this won’t make Vestager may new friends in Brussels.... | |
| Am I wrong to think this will make it significantly harder for Vestager to secure French support for a commission presidency bid? https://t.co/otYVW2AbX4 | |
| Ocado’s shares have now slumped by 7.5% since it warned that the fire at its Andover distribution centre was worse than first feared. | Ocado’s shares have now slumped by 7.5% since it warned that the fire at its Andover distribution centre was worse than first feared. |
| That wipes more than £500m off the value of the company, leaving it firmly stranded at the bottom of the FTSE 100 leaderboard. | That wipes more than £500m off the value of the company, leaving it firmly stranded at the bottom of the FTSE 100 leaderboard. |
| Here’s our news story about the fire, and the disruption it will cause: | Here’s our news story about the fire, and the disruption it will cause: |
| Ocado says fire at warehouse will hit sales growth and orders | Ocado says fire at warehouse will hit sales growth and orders |
| As these photos show, firefighters are still attending the scene in Hampshire today: | As these photos show, firefighters are still attending the scene in Hampshire today: |
| German carmaker Daimler has reported that net profits almost halved in the last quarter of 2017, as the diesel crisis hurt demand. | German carmaker Daimler has reported that net profits almost halved in the last quarter of 2017, as the diesel crisis hurt demand. |
| Daimler’s earnings were scraped by the cost of developing new, greener, technologies for electric vehicles. | Daimler’s earnings were scraped by the cost of developing new, greener, technologies for electric vehicles. |
| The US-China trade war also hurt profitability, as it meant higher tariffs on some cars manufactured at Chinese or American factories. | The US-China trade war also hurt profitability, as it meant higher tariffs on some cars manufactured at Chinese or American factories. |
| Although revenues rose 7%, net earnings fell 49% to €1.64bn, in another sign that German companies found 2018 tough going. | Although revenues rose 7%, net earnings fell 49% to €1.64bn, in another sign that German companies found 2018 tough going. |
| Associated Press has more details: | Associated Press has more details: |
| “For Daimler, 2018 was a year of strong headwinds,” said CEO Dieter Zetsche, presenting his last annual results before handing off to successor Ola Kallenius at the May 21 shareholder meeting. | “For Daimler, 2018 was a year of strong headwinds,” said CEO Dieter Zetsche, presenting his last annual results before handing off to successor Ola Kallenius at the May 21 shareholder meeting. |
| He said that “we cannot and will not be satisfied” with lower profit margins. He added that the company was coming up with plans to increase profitability though declined to indicate what steps might be taken. | He said that “we cannot and will not be satisfied” with lower profit margins. He added that the company was coming up with plans to increase profitability though declined to indicate what steps might be taken. |
| More reaction to today’s German data: | More reaction to today’s German data: |
| Uh-oh! #Germany's factory orders are down a whopping 7% YoY in December. Germany is not of out the #recession woods yet! pic.twitter.com/ojUqd0OCUP | Uh-oh! #Germany's factory orders are down a whopping 7% YoY in December. Germany is not of out the #recession woods yet! pic.twitter.com/ojUqd0OCUP |
| Germany jumped out of the frying pan into the fire... Construction PMI (January) 50.7 vs. 53.3 prior ! #Germany #EURUSD #DAX | Germany jumped out of the frying pan into the fire... Construction PMI (January) 50.7 vs. 53.3 prior ! #Germany #EURUSD #DAX |
| Britain’s watchdogs have been showing their teeth this morning. | Britain’s watchdogs have been showing their teeth this morning. |
| The Advertising Standards Authority’s (ASA) has banned gambling ads that ran in ITV’s I’m a Celebrity … Get Me Out of Here app for breaking rules designed to protect children from being encouraged to bet. | The Advertising Standards Authority’s (ASA) has banned gambling ads that ran in ITV’s I’m a Celebrity … Get Me Out of Here app for breaking rules designed to protect children from being encouraged to bet. |
| I'm a Celebrity … app maker forced to pull gambling adverts | I'm a Celebrity … app maker forced to pull gambling adverts |
| Here’s our news story about the crackdown on travel sites who use unscrupulous tactics to scare people into making holiday bookings: | Here’s our news story about the crackdown on travel sites who use unscrupulous tactics to scare people into making holiday bookings: |
| Hotel booking sites forced to end misleading sales tactics | Hotel booking sites forced to end misleading sales tactics |
| One common trick, apparently, is to tell you that X customers are also looking at the same hotel - without revealing that they’re actually looking at different days! #scoundrels | One common trick, apparently, is to tell you that X customers are also looking at the same hotel - without revealing that they’re actually looking at different days! #scoundrels |
| When booking sites tell you a hotel was "booked four times in the last day", did you know that they mean "for any dates", not just the ones you're looking for? Or that if you saved "£50 by booking here", that may be compared to a completely different rate? https://t.co/rCErv5oJum | When booking sites tell you a hotel was "booked four times in the last day", did you know that they mean "for any dates", not just the ones you're looking for? Or that if you saved "£50 by booking here", that may be compared to a completely different rate? https://t.co/rCErv5oJum |
| More bad news from Germany -- growth across its building sector almost fizzled out last month. | More bad news from Germany -- growth across its building sector almost fizzled out last month. |
| Data firm Markit says its German construction PMI (which measures activity across the sector) fell to just 50.7, down from 53.3 in December. That’s worryingly close to stagnation (50.0). | Data firm Markit says its German construction PMI (which measures activity across the sector) fell to just 50.7, down from 53.3 in December. That’s worryingly close to stagnation (50.0). |
| Markit says construction firms were hit by bad weather in January, which made it harder for builders to crack on. | Markit says construction firms were hit by bad weather in January, which made it harder for builders to crack on. |
| Commercial construction activity fell at the fastest rate in almost six years, while house-building increased at a much slower rate than in December. | Commercial construction activity fell at the fastest rate in almost six years, while house-building increased at a much slower rate than in December. |
| Phil Smith, Principal Economist at IHS Markit, says the PMI data shows slower growth across a number of key business metrics. Winter storms, snow and ice are probably the main culprits, he adds. | Phil Smith, Principal Economist at IHS Markit, says the PMI data shows slower growth across a number of key business metrics. Winter storms, snow and ice are probably the main culprits, he adds. |
| The fact that growth in total industry activity slowed down more than new orders, which remained comparatively robust, suggests that it wasn’t necessarily a demand-driven slowdown and that severe bad weather probably did cause some disruption to actual work on the ground during the opening month of the year. | The fact that growth in total industry activity slowed down more than new orders, which remained comparatively robust, suggests that it wasn’t necessarily a demand-driven slowdown and that severe bad weather probably did cause some disruption to actual work on the ground during the opening month of the year. |
| European stock markets have opened in the red, after this morning’s woeful German factory orders. | European stock markets have opened in the red, after this morning’s woeful German factory orders. |
| In Frankfurt, the DAX index of Germany’s top companies has lost 0.3%, with Daimler down almost 2% and Deutsche Bank down 1.5%. | In Frankfurt, the DAX index of Germany’s top companies has lost 0.3%, with Daimler down almost 2% and Deutsche Bank down 1.5%. |
| In London, the FTSE 100 has dropped by 18 points (0.3% to 7,158, away from last night’s three-month low. Online grocery firm Ocado is leading the fallers, down 5%, after a huge fire swept through its robotic warehouse in Hampshire. | In London, the FTSE 100 has dropped by 18 points (0.3% to 7,158, away from last night’s three-month low. Online grocery firm Ocado is leading the fallers, down 5%, after a huge fire swept through its robotic warehouse in Hampshire. |
| Ocado has just told shareholders that the damage is wore than first thought: | Ocado has just told shareholders that the damage is wore than first thought: |
| Unfortunately the fire which started yesterday morning in a corner of the ambient grid was not contained as we believed, and last night expanded. | Unfortunately the fire which started yesterday morning in a corner of the ambient grid was not contained as we believed, and last night expanded. |
| Whilst we are informed by the Fire Brigade that it is now under control, during the night part of the roof collapsed and there has been substantial damage to the majority of the building and its contents. | Whilst we are informed by the Fire Brigade that it is now under control, during the night part of the roof collapsed and there has been substantial damage to the majority of the building and its contents. |
| Today’s grim factory orders data come just hours after Deutsche Bank warned that Germany is probably heading for recession. | Today’s grim factory orders data come just hours after Deutsche Bank warned that Germany is probably heading for recession. |
| In a new report, Deutsche economists wrote: | In a new report, Deutsche economists wrote: |
| “The start of the German economy into 2019 has been a major disappointment so far. | “The start of the German economy into 2019 has been a major disappointment so far. |
| “The development of several key cyclical indicators is telling us that the German economy is drifting towards recession right now.” | “The development of several key cyclical indicators is telling us that the German economy is drifting towards recession right now.” |
| They could point to a drop in German industrial output late last year, and a smaller-than-expected drop in unemployment in January. | They could point to a drop in German industrial output late last year, and a smaller-than-expected drop in unemployment in January. |
| Deutsche Bank Says German Economy Is Drifting Toward Recession https://t.co/XVXggfXLrx | Deutsche Bank Says German Economy Is Drifting Toward Recession https://t.co/XVXggfXLrx |
| German factory orders “took a nosedive” in December, says economist Carsten Brzeski of ING ruefully, adding: | German factory orders “took a nosedive” in December, says economist Carsten Brzeski of ING ruefully, adding: |
| The inventory build-up in recent months, as well as the recent drops in order books, suggest that any rebound of industrial activity in Germany will be slow and sluggish. | The inventory build-up in recent months, as well as the recent drops in order books, suggest that any rebound of industrial activity in Germany will be slow and sluggish. |
| Germany’s economy ministry doesn’t see much cheer in today’s factory orders, saying: | Germany’s economy ministry doesn’t see much cheer in today’s factory orders, saying: |
| “The decline in orders in December suggests that the weak phase in industry will continue for now. | “The decline in orders in December suggests that the weak phase in industry will continue for now. |
| The latest sentiment indicators also point to muted momentum at the start of the year.” | The latest sentiment indicators also point to muted momentum at the start of the year.” |
| The decline in German factory orders was mainly due to weaker demand for abroad. | The decline in German factory orders was mainly due to weaker demand for abroad. |
| Orders from outside the eurozone plunged by 5.5% month-on-month in December, while domestic orders dipped by 0.6%. | Orders from outside the eurozone plunged by 5.5% month-on-month in December, while domestic orders dipped by 0.6%. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Concerns over the health of the German economy are mounting this morning, after Europe’s largest economy suffered another big fall in manufacturing orders. | Concerns over the health of the German economy are mounting this morning, after Europe’s largest economy suffered another big fall in manufacturing orders. |
| Germany factory orders plunged by 1.6% in December, new figures released this morning show, due to weak demand from overseas. | Germany factory orders plunged by 1.6% in December, new figures released this morning show, due to weak demand from overseas. |
| That’s much worse than the 0.3% rise which economists had expected, and follows a 0.2% decline in November. | That’s much worse than the 0.3% rise which economists had expected, and follows a 0.2% decline in November. |
| On an annual basis, orders were a chunky 7% lower than in December 2017. That looks to be the biggest drop since 2012. | On an annual basis, orders were a chunky 7% lower than in December 2017. That looks to be the biggest drop since 2012. |
| 🇩🇪 #Germany Dec #Manufacturing Orders:*M/M: -1.6% v 0.3%e (largest ⬇ since June 2018)*Y/Y: -7.0% v -6.7%e (largest ⬇ since June 2012) pic.twitter.com/PRZVSnoPXS | 🇩🇪 #Germany Dec #Manufacturing Orders:*M/M: -1.6% v 0.3%e (largest ⬇ since June 2018)*Y/Y: -7.0% v -6.7%e (largest ⬇ since June 2012) pic.twitter.com/PRZVSnoPXS |
| Such a weak result shows that Germany’s industrial base is struggling in the face of trade tensions, slowing global growth, and Brexit anxiety. | Such a weak result shows that Germany’s industrial base is struggling in the face of trade tensions, slowing global growth, and Brexit anxiety. |
| Germany’s car industry has also had a bad few months. They’ve struggled to get models tested and onto the road following the introduction of new, tougher, pollution rules. | Germany’s car industry has also had a bad few months. They’ve struggled to get models tested and onto the road following the introduction of new, tougher, pollution rules. |
| We already know that German GDP shrank by 0.2% in July to September; some economists fear its economy may have kept shrinking, putting the country into recession. | We already know that German GDP shrank by 0.2% in July to September; some economists fear its economy may have kept shrinking, putting the country into recession. |
| The Recession word is getting louder. #Germany's Industrial Order dropped 1.6% in Dec m/m vs a gain of +0.3% expected. Capital goods orders fall 2.5% m/m. pic.twitter.com/J4cA5gmyNQ | The Recession word is getting louder. #Germany's Industrial Order dropped 1.6% in Dec m/m vs a gain of +0.3% expected. Capital goods orders fall 2.5% m/m. pic.twitter.com/J4cA5gmyNQ |
| More reaction to follow.... | More reaction to follow.... |
| Also coming up today | Also coming up today |
| European stock markets are tipped to open flat, after a strong rally on Tuesday that saw the FTSE 100 jump by 2% to a new three-month high. | European stock markets are tipped to open flat, after a strong rally on Tuesday that saw the FTSE 100 jump by 2% to a new three-month high. |
| Britain’s Competitions and Markets Authority is enforcing a clampdown on some of the biggest online hotel booking sites - calling it “a victory for UK holidaymakers”. More on that shortly. | Britain’s Competitions and Markets Authority is enforcing a clampdown on some of the biggest online hotel booking sites - calling it “a victory for UK holidaymakers”. More on that shortly. |
| Struggling outsourcing group Interserve has announced a whopping debt-for-equity swap rescue deal. | Struggling outsourcing group Interserve has announced a whopping debt-for-equity swap rescue deal. |
| Interserve has announced an epic debt-for-equity swap which saves the company but massively dilutes existing shareholders:“the shares issued through the Placing and Open Offer will account for 97.5% of the ordinary share capital of Interserve”https://t.co/kxdbJbPzSX | Interserve has announced an epic debt-for-equity swap which saves the company but massively dilutes existing shareholders:“the shares issued through the Placing and Open Offer will account for 97.5% of the ordinary share capital of Interserve”https://t.co/kxdbJbPzSX |
| Cabinet Office voices concern over Interserve rescue deal | Cabinet Office voices concern over Interserve rescue deal |
| Plus we should get new US trade figures, and the weekly oil inventory stats, which should give another insight into the state of America’s economy | Plus we should get new US trade figures, and the weekly oil inventory stats, which should give another insight into the state of America’s economy |
| The agenda | The agenda |
| 1.30pm GMT: US trade figure for November | 1.30pm GMT: US trade figure for November |
| 3.30pm GMT: US weekly oil inventory figures | 3.30pm GMT: US weekly oil inventory figures |