German industrial production rises sequentially in May

German industrial production rose on a sequential basis in May. Industrial production grew 2.6 percent, the most since November. Consumer goods production rose 6.5 percent sequentially, the steepest monthly rise on the series, but other major categories added considerably too. For instance, output of intermediate goods rose 3 percent sequentially, to leave overall manufacturing production rose 2.7 percent sequentially, while construction recorded a third straight monthly rise of a similar rate.

But, the series has become volatile, noted Daiwa Capital Markets Research in a report. Looking through the recent noise, the results are not nearly as encouraging as May’s headline figures imply. Growth in total industrial production on a three-month basis was just 0.3 percent three-month-on-three-month, just a bit higher than the quarterly rate witnessed in the first quarter and considerably softer than equivalent readings last year. Assuming May’s rise will not get entirely reversed in June, growth in the sector over the second quarter should stay positive.

“However, with business surveys signalling weaker momentum - the June manufacturing PMI was the lowest since the end of 2016 - the outlook for manufacturing output in Germany and in the euro area as whole does not appear wholly favourable, not least against the backdrop of rising concerns about the impact of Trump's various trade wars on the global economy”, added Daiwa Capital Markets Research.

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