Germany's Factory Output Grew Again

Germany's Factory Output Grew Again

over 3 years ago2 mins

German factory output climbed for a third straight month, but there are signs Europe’s largest economy is starting to feel the burn 🏭

What does this mean?

Data on Friday showed factory orders grew almost 3% in July thanks to increased demand from outside the eurozone. But keep the champagne on ice: economists had expected much faster growth after the previous month’s impressive 29% expansion. Plus, output is still around 8% below where it was in February, before the pandemic forced businesses to shut up shop – or, y’know, factory.

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If manufacturing concerns aren’t dramatic enough for you, senior government officials have also been arguing that the country should respond to the apparent poisoning of an opposition politician in Russia 🤔 And that might involve pulling out of the potentially economy-boosting Nord Stream 2 pipeline project that’ll bring Russian natural gas onto German soil…

Why should I care?

European Central Bank (ECB) policymakers are no doubt watching this economic data closely ahead of their meeting this week – not least because prices of goods in the eurozone fell 0.2% last month 🇪🇺 That’s way below the ECB’s target of a 2% rise, and might be why economists expect the central bank to boost the economy with more quantitative easing before the year’s out. That hot take seems all the toastier given hints from ECB officials that they’re uncomfortable with the euro’s newfound strength, which makes inflation even harder to come by.

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Europe’s interest rates are persistently low too, and they’re making life especially tough for the region’s banks 🏦 The ECB has held its key rate at a record low of -0.5% for the past year, which squeezes the difference between how much banks can charge to lend money and how much they can pay savers. That trend seems to have brought two big Spanish banks – CaixaBank and Bankia – together: they announced a potential merger on Friday that would create a new $17 billion lender – the biggest in Spain.

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