Germany: Industrial production off to a weak start in early 2018, as output contracts in February
In February, industrial production contracted 1.6% from the previous month in seasonally- and working-day adjusted terms, a sharper decline than January’s revised 0.1% increase (previously reported: -0.1% month-on-month). The result contrasted market expectations of a modest 0.3% expansion in output. Moreover, it marked the strongest downturn since August 2015, as well as the fourth drop in the past six months. The result signals that Europe’s biggest economy experienced turbulence in the early stages of this year, likely due to a combination of seasonal factors (such as weather conditions and sickness among employees) and a moderation in the industrial sector. However, business confidence remained at elevated levels throughout the first quarter and suggests that the slowdown is temporary.
February’s print was led by a sufficiently broad-based deterioration in output. The construction sector noted the biggest shift in fortunes, logging a 2.2% contraction compared to the prior month’s revised 2.7% expansion (previously reported: 1.5% mom). Output in the mining sector contracted again, albeit less sharply than in the prior month. The sector clocked a 0.2% contraction, while in January output decreased by a revised 7.8% (previously reported: -7.9% mom). Meanwhile, manufacturing production fell 2.0%, contrasting the prior month’s revised flat reading (previously reported: +0.7% mom). The energy sector provided a silver lining, however: Production increased 4.7%, starkly contrasting January’s revised 4.1% contraction (previously reported: 4.0% mom).
A year-on-year comparison showed that industrial production expanded 2.6% in February, a moderation from the revised 6.3% increase seen in January (previously reported: +5.5% yoy). Meanwhile, annual average growth in industrial production edged up from a revised 3.9% in January (previously reported: +3.8%) to 4.0%.