German industrial production falls in December, GDP growth likely stagnated in Q4 2019

German industrial production came in below expectations. Industrial production dropped 3.5 percent sequentially in December. The Federal Statistical Office showed that construction output dropped 8.7 percent, in spite of the rather mild weather conditions. Manufacturing dropped 2.9 percent.

These sharp falls possibly undershoot the underlying negative trend. Around the turn of the year, the statisticians always have issues to eliminate the sometimes massive effect of the timing of the Christmas holidays and thus the length of the factory holidays as part of the seasonal adjustment.

Given the soft performance in recent months, some firms are expected to have extended these holidays again, noted Commerzbank in a research report. A further hint in this direction is that the December production figures released today below the trend. Consequently, production is likely to show a counter-movement by February at the latest.

Nevertheless, this does not change the fact that the trend in production continues to point downwards. Furthermore, the soft December figures for industrial production, the risk has risen that the real GDP has stagnated or even fallen a bit in the fourth quarter, in spite of indications to the contrary from the Federal Statistical Office in mid-January, said Commerzbank.

“At least the December figures for foreign trade, also published today, offer a certain glimmer of hope. They suggest that at least exports increased in the fourth quarter, so the global economy has recently returned some tailwinds”, added Commerzbank.