German industrial production rises unexpectedly in March

German industrial production rose unexpectedly in March. Sequentially, industrial production grew 0.5 percent, as compared with prior month’s rise of 0.4 percent and consensus expectations of a fall of 0.5 percent. Part of the positive surprise is because of the renewed solid construction output. Nevertheless, production in manufacturing also rose a bit by 0.4 percent. Figures released today imply that the real GDP growth in the March quarter might be slightly stronger than previously assumed, noted Commerzbank in a research report.

“On the basis of today's figures, a plus of 0.3 percent compared to the previous quarter is likely, whereby the risks are even rather to the upside”, said Commerzbank.

Even if this might signify a slightly stronger start to 2019 than what was assumed earlier, there are hardly any upside risks for the projection. The subdued mood among firms and the soft development of orders since the beginning of 2019 suggest that manufacturing production might drop markedly again in the months ahead.

“After all, our trend in March, calculated on the basis of incoming orders, was around 2½ percent below the actual production level (chart). Therefore we expect production expected to fall significantly again in the second quarter. If the counter-movement in construction already expected for March happened in addition, real GDP could even fall somewhat in the Q2. So today's figures and a somewhat stronger increase of real GDP in Q1 certainly do not signal an end to the weakness of the German economy”, added Commerzbank.

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