Industrial activity drops at the steepest in over a year in May

Industrial production decreased 2.5% on a calendar-adjusted month-on-month basis in May (April: +0.1% mom). May's figure marked the worst reading since December 2022 and fell short of market expectations. May's figure largely reflected manufacturing output, which dropped at the sharpest rate in over two years. Moreover, the downturn in construction intensified. That said, mining and quarrying production contracted at a more moderate pace, and energy output gained momentum. On an annual basis, industrial production dove 6.7% in May, which was significantly below April’s 3.7% fall and marked the worst result since August 2020. Accordingly, the trend pointed down, with the annual average variation of industrial production coming in at minus 4.0% in May, down from April's minus 3.4%.

ING’s Carsten Brzeski commented: “There are still several cyclical factors potentially dragging down economic activity. Higher oil prices as a result of the ongoing military conflicts in the Middle East could easily weigh on industry and exports once again. Also, the increasing number of insolvencies and individual company announcements of upcoming job restructurings are not only fuelling the risk of a weakening labour market this year but also argue against a strong industrial rebound. Finally, besides the potential cyclical headwinds, Germany’s well-known structural weaknesses will not disappear overnight and will limit the pace of any rebound.”

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