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German industrial production rises below expectations in July, strong rise is likely in Q3

German industrial production rose 1.2 percent sequentially in July, coming in far below expectations of a growth of 4.3 percent. This is the second disappointing figure in a row: like new orders on Friday, industrial production came in below expectations. The lower rise is partially because of sharp decline in construction output of 4.3 percent. The increase for manufacturing was higher at 2.8 percent. Moreover, the figure for June has been upwardly revised a bit. Nevertheless, the recovery possibly lost momentum at the start of the summer, noted Commerzbank in a research report.

“However, it is certainly not over yet. This is because our trend for production, calculated on the basis of new orders received in recent months will continue to rise significantly in the next two months, even if new orders were to stagnate at the July level. As sentiment indicators tend to point to a further rise in orders, the increase is likely to be even stronger. Therefore, a very strong increase in industrial production and real GDP is still expected for Q3”, stated Commerzbank.

Looking at the individual sectors, the production in the automotive sector rose strongly again by nearly 7 percent. Here, production has returned to nearly 85 percent or pre-crisis levels. On the contrary, production in the mechanical engineering sector has dropped by nearly 4 percent.

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