Bag of mixed data

Bag of mixed data. German industrial production struggled to gain further momentum in November, dropping by 0.1% MoM, from +0.6% in October. On the year, industrial production is now down by 0.5%. The November drop was mainly driven by weaker production in the energy sector. Production in the manufacturing sector, capital goods and consumer goods continued the positive trend of the last months. At the same time, November trade data indicated that the export sector is still suffering from geopolitical tensions and Eurozone stagnation as exports dropped by 2.1% MoM, from -0.5% MoM in October. As imports increased by 1.5% MoM, the seasonally-adjusted trade balance narrowed to 17.6 bn euro, from 20.8 in October. Today’s data provides further evidence that the German economy has not yet fully recovered from the soft spell of the summer. In fact, the German economy still counts its bruises. Nevertheless, in our view, the economy should gain more momentum in the coming months, benefitting from its very special stimulus package which almost came for free. The sharp drop in energy prices and the weaker euro exchange rate are without any doubt a blessing for the economy. An economy, which actually has reached the end of a virtuous cycle and is in need of a new boost. Preferably, from structural reforms. While new structural reforms are still needed, lower energy prices and a weak euro are the well-known gift horse, which no one should look in the mouth. The drop in energy prices should particularly benefit consumers and SMEs. Contrary to big corporates, these are the economic players which simply are unable to strategically react to increased energy prices and which will now fully use the unexpected windfalls, to either invest or spend. Regarding the weaker euro, German exporters are traditionally amongst the main beneficiaries of all Eurozone countries, together with the Netherlands and Ireland. In fact, with stagnating prices at home and a weak currency, the export business should become attractive again in 2015.