In August, industrial production decreased markedly, down 4% m/m, recording the largest drop since January 2009. On a year-on-year basis, it was down –3% while its underlying trend remained downward orientated, unchanged from the previous month at -0.9% q/q in August.
Output decreased even more in the manufacturing sector (-4.8% m/m, the largest drop since January 2009). It also declined in construction (-1.2% m/m), down for the fourth consecutive month. Conversely in the energy sector, output was roughly unchanged (+0.3% m/m) after plunging by 3.9% in July. Amongst manufacturing branches, capital goods output, which accounts for a third of industrial output and is a good leading indicator of capital investment, reported a very large decline (-8.8%), while output in intermediate goods and consumer goods were down 1.9% and 0.4% respectively . All in all, the deceleration in the manufacturing underlying trend continues to worsen from -0.4% q/q in July to -0.7% in August.
In addition manufacturing orders released on Monday plunged in August (-5.7% m/m) recording the largest decrease since January 2009 and totally offsetting the previous month increase (+4.9% m/m). August fall was mainly due to foreign orders, which declined markedly (-8.4% m/m, the largest decrease since January 2009) more than offsetting July large rise (+7.9% m/m) while domestic orders decreased less markedly (-2.0% m/m). In particular, orders from outside the Eurozone collapsed (-9.9% m/m). In August, consumer goods were the only sector where orders increased (+3.7 m/m) which is relatively good news in the current environment. Nonetheless manufacturing orders downward trend continued to worsen down from -0.3% in July to -1.2% in August and this does not bode well for manufacturing output in the coming months.
Today’s data confirm that the manufacturing recovery struggles to gather speed in Q3. Indeed perspectives remain worrisome, as the deceleration of growth in the emerging economies, in China in particular, and the tensions between Russia and the European Union could further impact German economic growth which vitality still largely relies on exports.
BY Caroline NEWHOUSE
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