German industrial production falls in June, likely to follow weaker trend in near future

German industrial production dropped more than expectations in June. On a sequential basis, industrial production dropped 0.9 percent in the month, as compared with consensus expectations of a fall of 0.5 percent.

Production in the manufacturing sector, which excludes construction and energy production, dropped 0.8 percent sequentially. Construction output even dropped 3.2 percent, while energy production rose 2.9 percent in June.

According to some analysts, incoming orders and production data in recent months were distorted to the downside because of adverse impacts such as a wave of influenza or strikes in the metal industry, and concluded that the solid May figure indicated the “normal state”, stated Commerzbank in a research report.

Nevertheless, the argument was that the underlying trend of the German economy since the start of the year was considerably softer and May was oversubscribed. Even if the leading indicators have stabilized recently, they are still considerably lower than at the start of the year, said Commerzbank. Moreover, the production is expected to follow a softer trend in the near future.

“For the economy as a whole, the slack should not be over yet and rather continue in the second half of the year. For the second quarter, we expect GDP growth of 0.4 percent”, added Commerzbank.

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