German industrial production falls sharply in April, economy likely to contract at double-digit rate in Q2

German industrial production fell sharply by 17.9 percent in April on a sequential basis. The huge decline was widely expected. The construction and power generation sectors saw declines of 4.1 percent and 7.2 percent, respectively. Meanwhile, production in manufacturing suffered the generally expected fall of 22.1 percent, mainly due to the fact that automobile production in the country came to a virtual standstill for much of April.

Production in the “motor vehicles and motor vehicle parts” sector dropped by nearly 75 percent compared with the previous month. Nevertheless, production in the other industrial sectors was also 15 percent lower on average than in March, which was already quite soft, noted Commerzbank in a research report.

In all, industrial production was nearly 23 percent below the average of first quarter. This underpins the general expectation that German economy shrank at a double-digit rate in the second quarter compared with the first one, said Commerzbank.

“However, April probably marked the low point. For example, the VDA figures for car production in Germany, which are already available for May, show a noticeable increase again. Although the pre-crisis level has not yet been reached by far, production has nevertheless returned to around 40 percent of the average level of the previous year. If the official statistics for May show a similar level, this alone would mean an increase in industrial production of almost 5 percent in May”, added Commerzbank.