Germany: Disappointing Industrial Production once again – ING

Carsten Brzeski, chief economist at ING, suggests that hopes for a quick rebound of German industry were short-lived as industrial production dropped by 0.6% month-on-month in September, from 0.4% MoM in August.

Key Quotes

“On the year, industrial production was down by 4.3%. Activity in the manufacturing industry was down by 1.3% MoM. Activity in the construction sector recovered with an increase of 1.8% MoM in September.”

“Yesterday, new orders rebounded after two consecutive drops, adding to hopes that the manufacturing sector and with it, the entire economy could finally end the free fall which started in the summer of 2018. However, today’s industrial production data shows that any optimism on the outlook for German industry is premature.”

“Looking ahead, while there has been some stabilisation in confidence indicators, more structural factors in German industry continue to bode ill for industrial production in the coming months.”

“The only upside from this morning’s data is the strong rebound in activity in the construction sector. With the September rebound, construction should have been a weak but positive growth driver in the third quarter. Add to this that retail sales were also up on the quarter and a contraction in the third quarter of the entire economy (and therefore a technical recession) is not yet a done deal. So far, we only know that industry is in recession but not necessarily the entire economy. As so often, it will be the export sector, which decides on the fate of the German economy in the third quarter. Stay tuned.”