“German Industrial Output…”

German industrial production dropped in December, showed official data on Monday as supply chain bottlenecks and a drop in construction inhibited its economy at the close of last year.  The Federal Statistics Office said that the country’s industrial output dropped by 0.3% on the month after the upwardly revised figure of 0.3% in November. The office also said that production in 2021, was 3% higher than in 2020 and 5.5% lower than in the pre-crisis year 2019.  Last year the German economy expanded by 2.8% whilst France by 7%.  This shows the vulnerability of the German economy to supply chain bottlenecks hinder the manufacturing sector which is the backbone for exports.  The restrictions introduced in Autumn to combat a fourth COVID-19 wave had supply chain implications resulting in a contraction of 0.7% in the fourth quarter.  Meanwhile there are indications of a better start for 2022.  A survey last week showed that Germany’s manufacturing sector grew for the first time in six months in January amid the ease of bottlenecks that allowed producers to work and meet higher demand. 

Lagarde on the need for ECB Tightening

In light of the increasing inflationary risks, the ECB opened its door the previous week to an interest rate hike later in 2022 and said that the 10 March meeting will be crucial to decide how quickly the central bank would wind down its long-running bond-buying scheme.  However, Christine Lagarde on Monday said that there is no need for big monetary policy tightening in the eurozone as inflation is set to drop back and could stabilise around 2%.  She further argued that high inflation is unlikely to get entrenched and warned that high energy prices the biggest driver of inflation are likely to be a drag on prices further out as they eat into household purchasing power.  Lagarde said at a European parliamentary hearing, ”the chances have increased, , that inflation will stabilise at our target,”.  “There are no signals that inflation will be persistently and significantly above our target over the medium term, which would require measurable tightening.”  Although she repeated that inflation risks were on the “upside”, Lagarde said that the eurozone was not suffering from the sort of overheating others were experiencing.  She said, “This increases the likelihood that the current price pressures will subside before becoming entrenched, enabling us to deliver on our 2% target over the medium term, “ she said.  Lagarde stated “We will use any tools, any instruments that are needed in order to make sure that our monetary policy is properly transmitted throughout the whole euro area, to all member states.” 

Macron’s meeting with Putin

After a meeting held on Monday with Russia’s Vladimir Putin, French President Emmanuel Macron said that the coming days will be crucial and indicated some progress has been made in the talks.  Putin said that the first Moscow summit he held with a Western leader since Kremlin began massing troops near its neighbour has been substantive, however also repeated warnings about the threat of war if Ukraine joined NATO.  Russia wants security guarantees that include a promise of no missile deployments near its borders and a scaling back of NATO’s military infrastructure. Meanwhile the West said that Russia’s demands are “non-starters” but is willing to talk about arms control and confidence-building steps.  Macron told reporters, “The next few days will be decisive and will require intensive discussions which we will pursue together”. Meanwhile Putin suggested that some of Macron’s ideas could help lessen the crisis, stating “a number of his ideas, proposals, which are probably still too early to talk about, I think it is quite possible to make the basis of our further joint steps.”  Both will speak again after Macron meets Ukraine’s leadership.    

Malta:  Index of Industrial Production – December 2021

A press release dated 8 February, 2022 shows that seasonally adjusted index of industrial production decreased by 0.6% over the previous month.  Decreases in production were registered across three main industrial groupings: energy (1.2%), intermediate goods (1.1%) and consumer goods (0.8%). The production of capital goods increased by 1.7%.  Meanwhile, in December, 2021 the total production generated by the Maltese manufacturing, energy, and mining and quarrying industries dropped by 6.6% from December, 2020.  The largest decline was registered in the production of consumer goods (17.3%), intermediate goods (11%) while the production of energy and capital goods increased by 14.2% and 2% respectively.

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