German Industrial Production Logs Unexpected Fall

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Germany’s industrial production decreased unexpectedly in January on weak construction output, data from Destatis revealed on Monday.

Industrial production fell 2.5 percent month-on-month in January, while economists had forecast an increase of 0.2 percent after climbing by revised 1.9 percent in December.

Today’s figures should not be interpreted as a signal that the recovery in the producing sector is already over, Ralph Solveen, an economist at Commerzbank, said.

By spring at the latest, the trend in industrial production should clearly point upwards again and support the strong recovery of the entire economy that is then expected, the economist added.

Although the reduction in industrial output was largely due to a slump in construction and semi-conductor shortages in the auto sector, the poor January number is another reason to think that aggregate first quarter GDP will contract, perhaps quite sharply, Andrew Kenningham, an economist at Capital Economics, said.

On a yearly basis, industrial output dropped 3.9 percent, which was bigger than the December’s 1 percent decrease.

Compared with February 2020, the month before restrictions were imposed due to the coronavirus pandemic in Germany, production was 4.2 percent lower in January.

Excluding energy and construction, industrial output was down by 0.5 percent on month in January. Energy production was up by 0.6 percent, while construction output declined by 12.2 percent due to strong base effect and the end of the value added tax reduction.

Within industry, capital goods output showed a decrease of 0.8 percent and consumer goods output fell 3.0 percent. On the other hand, the production of intermediate goods grew 0.7 percent.

Data released last week showed that industrial orders expanded 1.4 percent month-on-month in January, reversing a 2.2 percent fall in the previous month.

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