Germany: Industry disappoints in December - ING

Carsten Brzeski, Chief Economist at ING, notes that the German industrial production dropped by a depressing 1.2% MoM in December, putting an end to a rather disappointing year for the German industry.

Key Quotes

“This was the sharpest monthly drop since August 2014. On the year, industrial production was down by 2.2%. Looking at the details, there was only one bright spot in the production of intermediate goods (+0.8% MoM). All other sectors saw a decline in production. Parts of this December drop can be explained by the timing of the Christmas vacation which put parts of the production process on halt for almost two weeks in December. However, the fact that industrial production in the final quarter of the year was almost 1% lower than in the third quarter illustrates the general weakness of Germany’s former growth engine.

At the same time, exports and imports both dropped by 1.6% MoM in December, narrowing the non-seasonally adjusted trade surplus to 18.8bn, from 20.5bn euro in November. December trade data show that German exporters have also started to suffer weaker foreign demand. Nevertheless, contrary to industrial production, the trade performance over the entire year 2015 was still positive.

All in all, this morning’s data were a painful reminder that not all is hunky dory in the Eurozone’s largest economy. With the strong labour market, low inflation, low interest rates and higher wages, consumption is strong and, in addition, services and the construction sector have become important growth drivers. The German industry, however, is still standing on shaky grounds.”