German industrial production dropped a bit in August as compared to the prior month. On a month-on-month basis, industrial production fell 0.2 percent, as compared with the consensus expectations of a rise of 1.5 percent. Manufacturing recorded a drop of as much as 0.7 percent. However, the fall seen in August was mainly because of a one-off effect. In the months ahead, production is likely to continue to rise, although not at the same pace as in recent months, said Commerzbank in a research report.
Other indicators such as VAT returns, industrial sales and the production figures published by the German Automobile Association had already suggested that there had been some slack in the rebound of the German economy in August. The main reason for this might have been this year’s rather late factory holidays in the automotive industry, which impacted production in August much more than usual. Production in the auto sector dropped 12.5 percent in August compared to the previous month. However, in the other sectors, production rose 1.4 percent on average, carrying on with its upward trend.
There are several factors that imply that the softer August figures do not mark the end of the recovery. The VAD figures for September indicated that the car production has risen markedly again in September. The industrial production’s trend is at present well above the current production level.
“We therefore assume that production resumed its upward trend in September and that the industrial sector thus made a major contribution to the significant increase in real GDP in the third quarter that we expect. In the fourth quarter, however, the pace is likely to slow down more and more as production approaches its pre-crisis level”, added Commerzbank.
