German industrial production experienced a steeper decline than originally anticipated in the month of June, according to data released on Monday. This data underscores the challenges confronting the manufacturing sector amid a downturn in the largest economy of Europe. In June, industrial production saw a decrease of 1.5% when compared to May’s figures. This decline was primarily driven by a significant 3.5% contraction in Germany’s automotive industry. This scenario raises the concern of a potential retraction within the manufacturing powerhouse later in the year, with the looming possibility of slipping back into a recessionary state. The observed dip in industrial output is poised to emerge as one of the contributing factors responsible for triggering a renewed contraction in Germany’s Gross Domestic Product (GDP) during the second half of 2023.
Furthermore, the construction sector, which experienced a notable contraction of 2.8% in output, also exerted an adverse influence on the overall industrial production, as indicated by the country’s official statistics office on Monday. The German manufacturing sector has encountered challenging times thus far in the year, grappling with diminishing orders, sluggish output, and elevated price levels. This is clearly exemplified by the final Purchasing Managers’ Index (PMI) for manufacturing provided by HCOB, which has experienced a decline for the sixth consecutive month, culminating in July.
The recent emergence from a recession during the April-to-June period, marked by a stagnant Gross Domestic Product (GDP) in comparison to the previous quarter, seems to be accompanied by tenuous prospects. The current provisional data suggests that the modest improvement in the economic outlook may not be sustainable over time. The German automotive sector, constituting roughly 5% of the national economy, continues to grapple with the aftermath of the pandemic-induced setback and persistent disruptions in supply chains.
Despite a noteworthy increase in car production, with approximately 2.2 million units manufactured in the first half of the year as reported by the German Automotive Industry Association, the output remains 10% lower than the corresponding period in 2019. A return to the pre-pandemic production levels appears to be an endeavour requiring additional time.
In other segments within Germany’s industrial sector, encompassing energy production among others, exhibit a more optimistic outlook. New manufacturing orders demonstrated a substantial surge of 7% in June, in comparison to the previous month, according to preliminary data released last Friday. However, these figures were influenced by large-scale orders, thereby potentially distorting the overall interpretation.
Turning attention to the stock market, the German benchmark index extended losses from last week, but overall price action remained trapped within the boundaries of the 15,456 – 16,528 trading range. Despite the large bearish divergence, which shows that the rally is running out of steam, as long as the index remains within its current range the up trend from the October 2022 low remains intact.
Given the recent loss of momentum the price action is likely to remain choppy in the near-term. Ultimately, a subsequent breakout from the current trading range would determine the direction of the next leg.
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Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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