### Summary
European stock markets edged higher, supported by a drop in German producer prices and a smaller-than-expected rate cut from China. German producer prices fell significantly in July, indicating a retreat in inflationary pressures. The European Central Bank is considering a pause in its hiking cycle, which could help alleviate economic difficulties in Germany. In China, the rate cut announced by the People's Bank of China was seen as underwhelming, as analysts had expected a larger cut. The U.K. housing market also slumped, with the fastest decline in August since 2018. Oil prices rebounded, supported by the Chinese rate cut and expectations of lower output from top producers in August.
### Facts
- 📉 German producer prices dropped 1.1% in July and fell 6.0% annually, indicating a retreat in inflationary pressures.
- 🇩🇪 Economic difficulties in Germany are affecting the eurozone's growth and may lead to a recession.
- 🏦 ECB President's speech at Jackson Hole will provide clues on the central bank's next move in September.
- 🇨🇳 The People's Bank of China announced a smaller-than-expected rate cut, disappointing analysts.
- 🏘️ The U.K. housing market experienced its fastest decline in August since 2018.
- 🛢️ Oil prices rose due to the Chinese rate cut and expectations of lower output from top producers.
### Summary
German producer prices in July saw their first year-on-year decline in over two-and-a-half years, falling 6.0%, due to easing energy price pressures, signaling a potential abatement of inflation in Europe's largest economy.
### Facts
- 📉 German producer prices declined by 6.0% in July compared to the same month last year.
- ⚡ Energy prices sank 19.3% in July on a yearly basis, with electricity prices falling by 30.0%.
- ❌ Excluding energy prices, producer prices in July rose 2.0% compared to the previous year.
- 📉 On a monthly basis, producer prices decreased by 1.1% in July.
- 🔍 Germany's producer price index, a key indicator for inflation, fell to 6.5% in July.
German producer prices fell more than expected in July, marking their first decline in over two-and-a-half years, as easing energy prices raised hopes for a further decrease in inflation in Europe's largest economy.
German business activity, particularly in the services sector, experienced its sharpest decline since May 2020, leading to concerns about the country's outlook for the remainder of the year and potential stagflation, as both manufacturing and services sectors are contracting.
The German economy stagnated in the second quarter of 2023, following a winter recession, with zero growth and a contraction in adjusted GDP, according to data from the statistics office.
Profits at China's industrial firms fell 6.7% in July, marking the seventh consecutive month of decline, as weak demand continues to hinder the country's post-pandemic recovery.
Japan's factory output fell more than expected in July, indicating a challenging start to the second half of the year for manufacturers amid concerns about China's growth and the global economy. Output declined 2.0% in July from the previous month, driven by decreased domestic and overseas orders, particularly in the electronic parts and production machinery sectors. However, car production rose 0.6% due to improved supply chain conditions.
German inflation fell slightly in August, but economists predict that the downward trend will continue in the coming months, with food prices showing above-average growth.
German exports fell slightly in July, raising concerns that the country's economy may be at risk of undoing previous gains, as global demand weakens and companies struggle with supply chain issues and eroding competitiveness.
German industrial orders fell more than expected in July, declining by 11.7% on a seasonally and calendar adjusted basis, due to a large order in the aerospace sector the previous month, indicating weakness in the global economy and high energy costs.
European stock markets edged higher as investors digested positive French industrial production data, although major cash indices are on track to register losses for the week, and the pan-European benchmark index has experienced seven consecutive days of losses. French industrial production rebounded more than expected in July, while figures for Spain showed a smaller-than-expected decline. However, German industrial production fell more than expected in July, and economic growth in the eurozone for the second quarter was just 0.1%. Concerns about the strength of the Chinese and Japanese economies have also risen. The tech sector is under pressure due to Apple's difficulties in China, and oil prices have retreated but are still on course for gains this week.
Germany is facing an economic contraction due to challenges in the manufacturing sector, a disappointing China reopening boost, and higher energy costs, leading to a recession in Europe's largest economy. However, there are still some positive aspects, such as opportunities in Germany's small and mid-sized companies.
Germany's economy, once dominant in global markets, has become the worst-performing major developed economy due to the loss of cheap Russian natural gas and other chronic problems, leading to criticism and concerns about de-industrialization and job losses.
Germany, once the beating heart of the European economy, is facing structural challenges and a sense of decline, with forecasts predicting slow growth and contraction in the coming years due to its heavy reliance on manufacturing and struggle to transition to renewable energy and a service-based economy.
Germany's economy, the largest in the EU, is expected to contract by 0.6% this year due to a slowdown in exports and years of under-investment in infrastructure and technology, posing long-term challenges for growth and requiring significant investment and reforms to address them.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/CUWTBL3PMNORHFET37GIMFD67U.jpg)