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Tuesday 24.10.2017 | Name days: Renāte, Modrīte, Mudrīte

Coface: Germany’s industrial sector has been struck by ‘momentary weakness’

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUGermany’s industrial sector’s results of Q32015 were largely negative, which prevented the sector from contributing to the country’s GDP growth. The situation was largely impacted by emerging challenges in the biggest developing markets, as concluded by Coface experts.

Coface says this industrial weakness will be a short one.

German industrial output has declined 0.2% when compared with the same period of 2014. This decline was caused by global economic fluctuations. The weakness of many developing markets has affected exports of German companies, especially for those working in the field of pharmaceuticals and engineering. At the same time, output of industries aimed at the local market – construction and energy production – has actually increased over the course of the year, says Coface Director in Latvia Arnis Blumfelds.

Data regarding new industrial orders also show a complicated external environment for production. The volume of industrial orders in Germany had declined 2.8% in Q3 2015. The reason for this was the decline of orders from countries outside of Eurozone (-8.6%).

The decline of demand from developing countries will continue impacting Germany’s economy. However, the effect will not be excessively large. For example, approximately 9% of Germany’s export is aimed at China. Estimates do show, however, that even in the event of China’s ‘hard landing’ the influence on Germany’s economy will be moderate, said Blumfelds.

Development of Germany’s automobile engineering industry may remain delayed longer not just because of the recent Volkswagen scandal. Slower growth rates of emerging markets and market decline affects demand for new and expensive cars, says the expert.

Regardless, perspectives for Germany’s industrial development remain positive. According to optimism indexes like IFO business climate index and PMI index, weakness will be controlled and short. Internal consumption and demand from other Eurozone countries will be the main engine for growth.

Germany’s GDP is expected to grow 1.6% this year and 1.6% the next. Coface’s risk assessment for the country is A1 – very low.

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