The latest data on Germany’s economy is surprisingly grim. Industrial production fell sharply in November, and the country is on the brink of a technical recession. Its government should get ready to loosen fiscal policy if output doesn’t bounce back soon.
November’s 1.9 percent month-on-month decline in industrial production followed a 0.8 percent drop in October. The economy’s overall output fell by 0.2 percent in the three months to September, so some economists now fear the euro zone’s largest economy could be heading for two quarters of contraction. To be sure, it might be a hiccup. German carmakers have been slow to adapt to new emission tests that became compulsory in September, causing delays in production. A warmer-than-expected November held down energy production. A public holiday fell in such a way as to encourage workers to take additional time off. Optimists including Germany’s central bank think the economy is still in good health.