The DAX index has registered sharp losses in the Thursday session. The DAX is currently trading at 11,168 down 1.38%. On the release front, German industrial production declined by 0.4%, well short of the forecast of a 0.8% gain. The European Commission released its economic forecasts for the eurozone. On Friday, Germany releases trade balance.
German manufacturing numbers continue to struggle, as the global trade war and weakness in the German auto sector is weighing on the manufacturing sector. Industrial production fell 0.3% in December, its sixth decline in seven months. This follows manufacturing production, which plunged 1.6% in December. Manufacturing PMI in January slipped below the 50-level, which separates contraction from expansion, for the first time in over four years. Weakness in manufacturing can be seen across the eurozone, as France and Italy both posted manufacturing PMIs in contraction territory in January. German consumer indicators have also stumbled, raising concerns about the health of the eurozone’s largest economy. CPI declined by 0.8% in January and retail sales plunged 4.3% in December. If the soft numbers continue, investor confidence could sag and send the DAX to lower levels.
The European commission economic forecast has projected moderate growth in the eurozone, but uncertainty is weighing on confidence. The bank’s lowered its growth forecast for the eurozone to 1.9% in 2018, down from 2.1% in the November forecast. For 2019, the growth forecast has also been revised down to 1.5%, compared to 1.9% in the November forecast. Inflation slipped in late 2018 due to lower oil prices, with an average inflation level of 1.7%. This is expected to dip to 1.6% in 2019. The report highlighted Brexit and the slowdown in China as key sources of uncertainty for European economies, adding that the projections were subject to downside risks.
