Weakness in German industry is now hitting the service sector, too.

Bloomberg is going to Bloomberg, and so October’s decline in industrial production was “unexpected,” and nowhere is there any admission that one of the causes is the effect of Germany’s climate policies on the country’s all-important industrial sector, mainly, but not solely, because of their effect on energy prices.

Nevertheless, here are some details:

German industrial production fell in October, kicking off the final quarter with an unexpected decline and dashing hopes that the key sector for Europe’s largest economy may slowly be overcoming its malaise.

Output decreased 1% from the previous month, worse than any forecast in a Bloomberg survey, which anticipated a 1% increase. The decline was mainly down to energy production, and “the automotive industry had a negative impact as well,” the statistics office said Friday.

“There’s still no end in sight to the industrial slump in Germany,” ING’s Carsten Brzeski said. “This is a very weak start to the fourth quarter, increasing the risk of a winter recession in Germany.”

Of course, the weakness in the auto sector is also, in no small part, the consequence of climate policy, in this case, the “transition” to electric vehicles, which is disrupting demand both at home and in the key Chinese market.

Adding to the grim picture, weakness in German industry is now hitting the service sector, too.

I wrote about Germany’s woes in a Capital Letter about a month ago. Here’s an extract:

Overall industrial production is back to where it was 18 years ago. According to some estimates, it may fall by another 20 percent by 2030, no small matter when the industrial sector accounts for about a fifth of the German economy and is its greatest strength. GDP declined by 0.3 percent in 2023 (underperforming all other G7 economies), and, despite earlier predictions of (extremely) modest growth, is now expected to shrink by 0.1 percent this year. It might recover a little (less than 1 percent) in 2025. Large corporate insolvencies surged by 37 percent in the first half of the year, a nine-year high. It is hardly surprising that Germans, a traditionally cautious bunch, continue to save at a high rate. The household-savings rate is 11.4 percent (compared with under 5 percent in the U.S.), another drag on domestic demand.

The bleak economic news won’t hurt the prospect of Germany’s two outsider parties in the almost certain event of an election on February 23rd. The populist-right AfD is currently running second in the polls on around 19 percent, and, despite some fall in its support, the curious far-left/conservative BSW is on 6 percent, a number high enough to ensure representation in parliament. Both the AfD and BSW are unhealthily sympathetic to the Kremlin. The center-right CDU/CSU, more conservative now than in Merkel’s day, are likely to win a plurality (they are currently on 32 percent), but with the AfD considered to be too rough to be an acceptable partner, they are likely instead to enter into coalition with the center-left SPD (currently on 15 percent) as well, and if they really have to, the Greens (12 percent). The free market (ish) FDP are not expected to make it back into parliament. Whether two-way or three-way, such a coalition will be divided, weak, and in no position to steer Germany out if its current morass.

Meanwhile, in France, the government has just fallen, but that’s another story.