German industrial output stronger than seen in June

German industrial output was slightly stronger than expected during June, data from the country’s economy ministry showed on Monday.

Output rose by 0.8% in monthly adjusted terms. This beat expectations of 0.7% growth in a survey by The Wall Street Journal. Manufacturing output was up by 1.5%, while construction output declined by 0.5%.

“The increase, however, comes too late to make a disappointing quarter for the German industry a good one,” said ING economist Carsten Brzeski.

The strong June was a robust end for German industry to what was a rather weak quarter, with output declining by 1% versus the first three months of the year, the ministry said in an accompanying statement.

The outlook for the coming months is somewhat unclear. Data released on Friday showed manufacturing orders in Germany having declined unexpectedly in June, which generally wouldn’t bode well for production figures. “With orders having come in rather weak recently, a sideways movement is the most that can be expected for the coming months, and it is even likely that a minus will be reported for July,” said Ralph Solveen of Commerzbank.

Yet not all are so downbeat. “Although factory orders data has been weak recently, survey data generally paint a more favorable picture of the economy. Therefore, we see a good chance that production in July increases further,” said Matthias Thiel, an economist at BNP Paribas.

The German economy is expected to have slowed considerably in the second quarter after strong, but unsustainable, growth in the first quarter. The country’s statistics office will release a preliminary estimate on Friday. Experts see Europe’s largest economy having grown 0.2% compared with the first quarter, when the economy expanded by 0.7%.

“Despite some resilience in recent survey data Brexit will ultimately weigh on GDP growth,” said Thiel, adding that quarterly growth should float around a range of 0.2% to 0.3% on the quarter in the second half of the year.

“All in all, today’s industrial production data take away some fears of a hard landing of the German economy in the second quarter,” said Brzeski.

Source: MarketWatch

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