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Germany feels China's chill

Monday, December 07, 2015 - 01:40

German industrial output inched up in October after two months of declines but the lower-than-expected reading suggested weak demand from emerging markets is taking its toll on a key sector of Europe's largest economy. But as Sonia Legg reports, economic sentiment in the euro zone improved in December to its highest level since August, helped by the ECB's ultra-loose policy.

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Weak demand from emerging markets is taking its toll on Europe's largest economy. At least the latest German industrial data certainly suggests that. It up slightly in October after two falls - but was weaker than expected. There's no need to panic though - even with Volkswagen adding to the gloom, says Simon French from Panmure Gordon, because of the weak euro. (SOUNDBITE) (English) PANMURE GORDON, CHIEF ECONOMIST, SIMON FRENCH, SAYING: "The result of the quantitative easing programme from the ECB and the result of lower interest rates has meant that German manufacturing exporters have been able to not only add their own levels of productivity to compete with the world economy but also those terms of trade are constantly improving for them." Germany's Economy Ministry said the survey was the first step towards overcoming a weak patch. Certainly recent data has been encouraging - with orders up, the private sector growing and businesses upbeat. Unemployment is also at a 24 year low - perhaps the reason why Siemens says it's keen to give apprenticeships to new migrants. That's an excellent strategy, says French, . (SOUNDBITE) (English) PANMURE GORDON, CHIEF ECONOMIST, SIMON FRENCH, SAYING: "Having new migrant flows involved in the German labour market and directly contributing reduced their temptation to join any radicalisation, many of the challenges that come with some of the migrant flows." There was also some good news for the rest of the euro zone. Economic sentiment improved in December to its highest level since August. It was helped by the European Central Bank's ultra-lose policy.