German industrial production output falls again in July, economy likely to grow moderately in Q3 2018

Industrial production in Germany dropped for the second consecutive month in July. Manufacturing recorded a greater decline. On a sequential basis, industrial production output dropped 1.1 percent in July, following a revised drop of 0.7 percent seen in June. A positive rise in the construction industry prevented an even more pronounced fall. In manufacturing, the drop was even more, recorded a fall of 1.9 percent. Therefore, the subdued phase of manufacturing has continued in the summer as well.

The figures for manufacturing are at present being negatively influenced by problems in the automotive industry with the introduction of new emission tests. However, even without this sector, production is moving sideways at best after the solid rise last year. Given the recent rather subdued order figures, this is unlikely to change as quickly, noted Commerzbank in a research report.

Therefore, the German economy is expected to grow just moderately in the third quarter. This is also underlined by today’s figures for foreign trade, according to which “nominal” exports dropped 0.9 percent in July compared with the previous month, while imports – in part probably due to higher prices – rose markedly by 2.8 percent. The ECB’s monetary policy continues to be quite expansionary and continues to stimulate the economy.

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