Germany: Industrial production drops in January
Data on the industrial sector in Germany disappointed again with production dropping 0.8% month-on-month in January, swinging from December’s revised 0.8% expansion (previously reported: +0.4% month-on-month) and contrasting market expectations of a 0.5% increase. January’s contraction was driven by a steep drop in capital goods output and a fall in intermediate goods production. On the other hand, consumer goods production increased at a steady pace and provided a silver lining.
Compared to the same month a year earlier, industrial output fell 3.3% in January, a sharper contraction than December’s upwardly revised 2.7% drop (previously reported: -3.9% year-on-year). Lastly, annual average growth in industrial production eased from 1.1% in December to 0.4% in January.
Commenting on the result, Carsten Brezski, chief Germany economist at ING, noted that “strong revisions of monthly data, tentative signs of domestic orders stabilising and still solid fundamentals suggest that the current volatility is merely a sign that the slump in German industry is reaching a nadir.” He continued to suggest that if reaching a nadir takes too long, the German government could use fiscal stimulus to get the German industry back on its feet.