Germany Evades Double-Dip

Mobius Intel Brief:

Germany’s flash 3Q24 GDP grew 0.2% Q/Q, narrowly evading a double-dip recession for Europe’s largest economy and manufacturing hub. While preliminary Q3 GDP estimates were positive, the data retains considerable uncertainty after the Federal Statistical Office sharply revised Q2’s GDP growth lower from -0.1% Q/Q to -0.3% Q/Q.

• Wednesday’s positive GDP surprise contrasts against a series of recent data that indicate an imminent inflection point for Europe’s industrial future — succumb to expensive energy and burdensome regulations or migrate operations to improve competitiveness. The latter choice invites an additional wave of incremental industrial energy demand for the U.S., though the US Nov 5 election and a possible resurgence in Trump administration tariffs on EU manufactured exports adds to European industrials’ near-term uncertainty.

Key Intel: This week, German automaker Volkswagen announced plans to lay off ‘tens of thousands’ of employees and shut at least three plants — the first VW factory closures on German soil. VW’s announcement follows Germany’s October flash manufacturing PMI, which extended its streak in contractionary territory to 26 months. Similarly, Q3’s industrial capacity utilization sank to 77% — a level only seen in early COVID shutdowns and prior recessions. German bankruptcies through July show filings accelerating at a 22% annualized rate to their highest since 2016, while anecdotal data shows business conditions at their most bearish since 2009.

Three Signs of Germany’s Industrial Inflection Point

WWMD: What Would Mobius Do?

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