German manufacturing slump weighs on euro-area economy

Bloomberg

Germany’s industrial slump worsened at the start of 2019, dragging the euro-area economy into its worst performance in more than five years.
IHS Markit’s monthly index showed manufacturing in Germany shrank for the first time in four years. In euro area it barely grew, and a broader measure of activity dropped to weakest since 2013. The euro fell after disappointing numbers and was down 0.2 percent to $1.1357. Germany’s 10-year yield slipped two basis points to 0.21 percent.
The readings will reinforce fears about the health of both the European and the global economy. That’s been a key talking point at the World Economic Forum in Davos this week, where the IMF cut its outlook and said an escalation of trade tensions could add further damage.
Those concerns will also play into the discussion among European Central Bank policy makers, who will meet in Frankfurt on Thursday. The ECB ended net bond buying last month. While officials already indicated then that they wouldn’t start raising interest rates for some time, the deteriorating outlook suggests they may hold off even longer.
“While data are not yet available for other countries, decline in the euro area PMI suggests weaker readings as well. This poses a clear downside risk to the latest ECB projections for 0.4 percent growth in 4Q18 and 0.5 percent in 1Q19. It confirms a clear loss of momentum and increases the likelihood that Draghi will describe risks to the outlook as tilted to the downside at the central bank’s press conference later today,” said Maeva Cousin, Bloomberg Economics.