German industrial production jumps in April, led by manufacturing

Industrial output in the euro area´s largest economy continued to power ahead in April, spearheaded by gains in manufacturing and production of capital goods.

Total production rose by 0.8% month-on-month, according to the country´s Ministry for Economic Affairs and Energy.

That was better than the 0.7% gain which economists had pencilled in.

Both factory and energy output increased by 1.1% month-on-month, with gains in the former led by a 2.2% jump in the production of capital goods.

Germany´s construction sector was again the weak link in the chain, with production down by 1.7% over the month following a 3.0% fall in the previous month; but some economists were confident that it would prove to be just a temporary setback.

“The decline in construction activity is exclusively a story about weather-related technicalities which have been clouding extremely bright fundamentals. Both new orders and building permits have been skyrocketing in recent months,” Dr.Andreas Rees, chief German economist at UniCredit Research said in a note sent to clients.

Dr. Rees pointed to a 6.4% quarter-on-quarter jump in new construction orders during the first quarter to back up his claims, which had accompanied an even more pronounced 10.2% rise over the previous three months.

Building permits had exhibited similar strength, rocketing by 12.2% over the quarter during the first three months of 2016 after a 7.8% gain in the previous quarter.

"Despite this short-term volatility, we stick to our growth forecast of 1.8% for 2016 as a whole."

On a more cautious note, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics chipped in: "Production was lifted mainly by a 2.2% month-to-month increase in capital goods output, however, which is in contrast to the story from yesterday’s new orders report that capital goods demand collapsed in April. We expect a significant reversal of capital goods production in May."