Surprise drop in German industrial production

Posted on 7 Jul 2014 by Callum Bentley

New figures from Destatis, Germany’s statistics agency, show that German industrial production slowed at its fastest rate for two years in the second quarter of 2014.

Industrial production dropped by 1.8% month-on-month in May on a seasonally adjusted basis, a performance considerably worse than had been expected.

Destatis also adjusted April’s industrial production figure to -0.3%, slightly lower than its previous figure.

The news comes amid speculation that geopolitical tension could be having a significant impact upon individual economies in the Eurozone. According to Germany’s Ministry for Economics, this recent period of sluggish growth is not a cause for concern. Growth in the first part of the year was helped by a mild winter which boosted construction and borrowed from what would have been second-quarter activity.

The Ministry said: “After a strong first quarter industry output weakened over the last months. Besides the effect of the bridge day in May and weakness in construction, which was to be expected after the mild winter, geopolitical factors may also have played a part.”

Economists have voiced disappointment with the figures. Andreas Scheuerle, an economist at Dekabank, said the slow growth was down to more than circumstantial factors: “Even if some of this is down to missing days at work… and might be recovered later, there was simply not the momentum in the second quarter.”

Optimistic assessments for the third quarter will also be tempered by the news that German factory orders, which are an important gauge of demand for goods made in Germany, also fell by 1.7% in May.