German industrial production grows in May, economy likely to have shrunk slightly in Q2

German industrial production grew in the month of May after falling in the prior month. Sequentially, the industrial production grew 0.3 percent, as compared with expectations of a fall of 0.4 percent and prior month’s drop of 2 percent.

Today’s report shows that the manufacturing might give hope that the fall in this sector that has lasted for over a year will gradually come to an end, noted Commerzbank in a research report. Manufacturing rose 0.9 percent. Moreover, exports of goods rose 1.1 percent in April.

Nevertheless, it is highly doubtful that these increase already hint at a turn for the better. This is because the rise in exports follows a slump of 3.7 percent in April and should therefore be seen more as a countermove to this very poor value.

The same applies to production, where in May car production in particular rose over 7 percent after a very weak previous month. Nevertheless, the figures for the German Automobile Association for June indicate that this is not the beginning of the long awaited rebound in this sector, but that production has recently dropped again.

“This should also apply to the other sectors, as our trend for production in manufacturing, which we calculate on the basis of incoming orders in recent months, continues to point clearly downwards. In May it was almost 3 percent below the current level of production, which is therefore likely to decline further. Thus, despite today's positive figures, the German economy is likely to have shrunk slightly in Q2. In addition, there are more and more indications that it has at best also increased slightly in Q3”, added Commerzbank.

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