German auto market figures disappoint in March, contribution of auto industry to be small to GDP growth in Q1

The German auto market figures for the month of March came in disappointing. Although the most recent development is not as subdued as the significant year-on-year falls in production and exports. Nevertheless, the rebound from the slump caused by the problems with the changeover to the new WLTP standard is much slower than generally expected. This indicates again that the German economy possibly only grew a bit in the first quarter, noted Commerzbank in a research report.

This month 14 percent fewer cars were produced than in March 2018, and the number of exported cars dropped by 9 percent year-on-year. Both figures have not yet rebounded from the summer slump, when carmakers had to considerably lower production because of issues with the transition to the new WLTP emissions standard.

However, the change from month to month adjusted for seasonal fluctuations is more significant for the assessment of the latest development. Here, too, based on the seasonal adjustment production dropped 3 percent. Nevertheless, since there had been nearly three times as much growth in February, the trend is still up and production rose a bit in the first quarter. However, the rebound is quite subdued and slower than many expected. Therefore, the contribution of the auto industry to economic growth will possibly be small in the first quarter.

So far, incoming orders are still providing hope for the months ahead. This is because the considerable minus in January still seems to be a counter-movement to the solid rise in the previous months. The order figures for February is due this week and will show whether this is actually the case, said Commerzbank.

“If car orders (as well as production) should have increased again in February – as we assume – this would suggest a continuation of the upward trend in the second quarter. Otherwise, however, there would be increasing signs that the weak production in recent months is not only due to the (ultimately temporary) WLTP problems”, added Commerzbank.

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