Germany: December Industrial Production Suggests a Slow Q4 in 2005, Labor Unrest Ahead?

There was more news from Germany that economic activity slowed significantly in the fourth quarter. Declines in December retail sales, new orders and sales in manufacturing and mining have already been reported and today we learn that industrial production fell 0.5% in December from November after having fallen 0.4% in the previous month. Production of intermediate and energy goods increased but were outweighed by declines in the production of capital and consumer goods.The increase in the quarterly average of industrial production for the fourth quarter was 1.05%, a decline from the 1.56% increase of the third quarter. As shown in the first chart the quarter-to-quarter change in industrial production tends to suggest the change in real gross domestic product.

Also in the news were reports of labor unrest in Germany. Ten thousand workers, members of the public service union, Verdi, began a strike in Baden-Wurttember on February 6th. Targeted services include waste disposal, road maintenance, hospitals and kindergartens. The issues are wages and hours. Wages have shown little increase in the past few years and the workers are now being asked to work longer hours at the same pay. The IG Metall engineering union is also stirring. It will start negotiations this week over its demand for a 5% rise for its 3.4 million industrial workers. The second chart shows the year-to-year changes in the compensation of workers in Total Industry ex Construction and in Public and Personal Services. The increases, particularly in the Public and Personal Services have been well below the roughly 2% inflation rate that has prevailed recently. These data, along with data for productivity and unit labor costs are found in Haver's Germany data base. The data are quarterly and were last updated in November 22. Data for the fourth quarter should be available later this month.