After yesterday’s very good figures for German incoming orders, industrial production for the month of August caused disappointment across the board: The expected strong increase was not achieved, instead there was a decrease of 0.2 percent compared to the previous month. This corresponds to a decrease of 9.6 percent compared to the same month last year. The weakness basically ran through all sectors, unfortunately it was particularly pronounced in the capital goods sector. Here production fell by 3.6 percent compared to the previous month and is again almost a fifth below the previous year’s level. This is particularly unfortunate as this sector is an indicator of investment activity. The situation is particularly gloomy in the automotive sector: According to the figures from the German automotive association VDA, a quarter fewer cars were built in the past twelve months than in the previous twelve months.
There was also another (moderate) decline in the construction sector. But he seems to have lost a little of his magic potion: At the beginning of the crisis it still seemed as if this sector was immune to Corona, it is slowly but steadily showing weaknesses.
Despite this overall rather sobering report, we remain confident that the recovery in German industry will slowly but surely continue: the positive mood in the industry, as evidenced by the ifo index and the purchasing manager indices, is supported by the good order intake. Sooner or later this will be reflected in production.
Author: Martin Moryson, Chief Economist Europe
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