Germany: Industrial activity contracts at sharpest pace on record in March
Industrial production declined 9.2% on a calendar-adjusted month-on-month basis in March (February: +0.3% mom). March’s reading marked the sharpest fall on record.
Looking at the details of the release, production of intermediate, consumer and capital goods all fell notably. Looking at sectors, output in the automotive sector dropped at a particularly sharp rate. On the other hand, the construction sector gained steam., providing a silver lining in the data as the sector should soften the economic contraction in the first quarter somewhat.
On an annual basis, industrial production decreased 11.6% in March, which was below February’s 1.8% fall. The reading marked the worst result since October 2009. Meanwhile, the trend pointed down, with the annual average variation of industrial production coming in at minus 4.1%, down from February’s minus 3.2% reading.
The data is another example of the severity of the impact of the global lockdown to curb the spread of the Covid-19 pandemic, with the German economy expected to contract sharply in the first half of this year as a result. While the gradual lifting of domestic restrictions should support the industrial sector somewhat, foreign demand is set to remain weak going forward and will thus be unable to lift the industrial sector from its slump.
Carsten Brzeski, chief Eurozone economist and global head of macro at ING, added that “contrary to the financial crisis and the important role of Asian countries in the swift recovery of the German industry, there currently is no savior in sight to quickly boost external demand.”