German Industrial Production Falls 1.1 Percent as Carmakers Drop 9.2 Percent
German industrial production fell 1.1 percent in July from June, the Federal Statistical Office reported on Monday, and 1.6 percent against July last year. June was revised to no change from the 0.2 percent increase first published.
1 sector explains most of it, and the office says why.
A shutdown did most of it
Motor vehicle production fell 9.2 percent on the month. The office attributes the decline mainly to that sector and says a multi-week production shutdown is likely to have been one of the main drivers, citing a release from the German automotive industry association. Energy production rose 4.7 percent, which it puts down in particular to electricity generation from wind and photovoltaics, and that partly offset the fall.
| July production, percent change on the month | Change |
|---|---|
| Energy | 4.7 |
| Construction | 0.9 |
| Investment goods | Minus 0.2 |
| Energy-intensive branches | Minus 1.7 |
| Consumer goods | Minus 2.2 |
| Industry excluding energy and construction | Minus 2.2 |
| Capital goods | Minus 3.4 |
| Motor vehicles and parts | Minus 9.2 |
Seasonally and calendar adjusted, real terms, provisional, as published by the office. Ranked high to low. The office’s English release lists capital goods and investment goods as separate lines and we carry both under the office’s labels rather than reassigning either.
The less volatile measure points the other way. Production across May to July was 0.4 percent higher than in the preceding 3 months. Energy-intensive branches, 5 sectors accounting for 77 percent of industrial energy consumption and 17 percent of industrial gross value added, were unchanged on the same comparison after falling 1.7 percent in the month alone.
New orders, published separately on 4 September, rose 2.5 percent in July, but the office says orders excluding large-scale orders fell 1.4 percent on the month and 2.2 percent on the 3 month comparison.
The revision matters as much as the print
A month that had been a modest expansion becomes a flat one, and July’s decline therefore starts from a lower base than the original figures implied. Industry excluding energy and construction is down 3.3 percent on the year.
Set against the quarterly picture Eurostat published the same morning, Germany grew 0.3 percent in the second quarter, below the euro area’s revised 0.6 percent, with employment down 0.1 percent on the quarter and 0.5 percent on the year. A car plant shutdown is a 1 month event. Being in the bottom half of the euro area growth distribution is not.
Why it matters: Germany is the largest economy in the currency union and the European Central Bank decides rates on Thursday. A monthly production print distorted by a plant shutdown will not move that decision on its own. The 3 month production trend at 0.4 percent points to some stabilisation, although July’s 2.5 percent rise in orders was driven by large-scale orders and orders excluding them fell 1.4 percent. The annual rate at minus 1.6 percent and the June revision argue that any stabilisation is from a low base and not yet secure.
Outlook: The August production figure is the one that will show whether the automotive decline was the shutdown or something more durable, since a normalisation of production schedules should remove at least part of July’s shutdown distortion, on our reading. Before that, the rate decision and the fresh projections land on Thursday.
Sources: Federal Statistical Office of Germany, Eurostat.
