German industrial production slumps in November

German industrial production unexpectedly dropped in November for the third consecutive month, according to figures released by Destatis on Tuesday, prompting concerns that the country may have entered a technical recession at the end of last year.

Industrial production fell 1.9% from October, when it declined by 0.8%, missing expectations for a 0.3% increase.

Meanwhile, the year-over-year rate declined 4.7% compared to a downwardly-revised 0.5% jump in October.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said production was hit by weakness across the board, but the 4.1% month-to-month drop in output of consumer goods did the main damage.

Production of capital and intermediate goods fell by 1.8% and 1.0%, respectively, and the weakness persisted outside core manufacturing too. In addition, production in the energy and construction sectors slipped by 3.1% and 1.7%, respectively.

"We think production rebounded in December, but these data have crushed all hope of a Q4 rebound in manufacturing following the weak Q3, which was driven mainly by falling exports and output of cars ahead of the new EU emissions regulation," said Vistesen.

"We now think production fell 1.4% quarter-on-quarter in Q4, only slightly worse than the 1.7% plunge in Q3. In other words, the German manufacturing sector was in recession in the second half of 2018, reflecting in part the fact that the industry hit capacity constraints earlier in the year and rising global uncertainty amid the trade conflict between the US and China."