German industrial production and factory orders dropped by the most since 2009, highlighting the increasingly difficult task for the ECB as it tries to avoid a second recession in two years.
The output of German industry fell 4.0 percent in August after expanding a revised 1.6 percent in July. The decline was far greater than the -1.5 percent predicted in the Bloomberg survey of economists. It was the largest contraction in industrial production since output collapsed 6.9 percent in January of 2009.
Orders to German factories also had their worst month since January 2009 slipping 5.7 percent more than double the -2.5 percent forecast, after rising 4.9 percent in July. Factory production is a crucial component of economic activity in Germany where the economy is dominated by export industries.
The euro zone economy did not grow at all in the second quarter after one year of expansion which averaged 0.23 percent per quarter and six quarters of recession stretching back to the last three months of 2011.
German GDP contracted 0.2 percent in the second quarter after a year of growth but with many German economic statistics and sentiment indicators turning down over the past two months the odds that the EMU's strongest economy will suffer its second straight negative quarter are rising.
The ECB has committed its monetary policy to buying private sector debt securities, though not sovereign bonds, despite the vehement objection of the German central bank, in an effort to stimulate economic growth and prevent deflation.
Annual inflation in the monetary union skidded to 0.3 percent in September the lowest on record except for the price collapse after the 2008 financial crisis. Prices have been falling in the euro zone for almost three years from a high of 3.0 percent in November 2011. The last month when CPI was at the ECB target of 2.0 percent was January 2013
The International Monetary Fund reduced its estimate for global economic growth to 3.8 percent today. In July the Washington based organization had predicted of 4.0 percent for this year. It warned of rising political tensions and a potential financial market correction as stocks trade at "frothy" levels.
In New York the Dow shed 273 points or 1.60 percent, closing at its 16,719, its lowest level since August 15th.
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