Sharp contraction in German industrial production in July
German industrial production sank in July pointing to a weak start to the quarter, although economists expected activity to bounce back in August.
Total output fell by 1.5% month-on-month (consensus: 0.1%), according to the Ministry of Economics.
Production of capital goods was weakest, shrinking by 3.6% and largely undoing June´s gain of 4.0%.
In comparison to a year ago, total production registered a decline of -1.2% (consensus: 0.1%) after a revised increase of 0.9% in the month before.
June´s increase in total output had initially been pegged at 0.5%.
Construction output was the bright spot in the report, recording a rise of 1.8% over the month.
"This indicates that building activity geared back up in Q3, after a lull in Q2. Construction is almost 50% of total capex in Germany, so these data offer a glimmer of hope for private investment amidst poor manufacturing data. We also note that the bar for a quarter-on-quarter rebound in Q3 production is low, although not low enough if these data continue!
"Overall, today’s report gives the upper hand to the downbeat message from the IFO relative to the resilient PMI, but we think that August and September data will be better," Pantheon Macroeconomics´s Claus Vistesen said in a research report sent to clients.