-- Production in Germany's manufacturing sector unexpectedly declined month over month in February, even before the war in the Middle East began, as output from the pharmaceuticals and electronics industries weakened, provisional data from the Federal Statistical Office showed Thursday.
Real, price-adjusted manufacturing output dropped 0.3% in February, after seasonal and calendar changes, compared with the upwardly revised stagnation in January. The consensus estimate for February was a 0.9% rise.
On a monthly basis, production of pharmaceuticals and computer, electronic, and optical products contracted 4.4% and 3.9%, respectively. Amid the cold winter weather, construction output slipped 1.2%, while automotive production improved 1.7%. Destatis data paints a picture of a "very reluctant, hesitant consumer," while the manufacturing sector struggles to gain positive momentum, said Carsten Brzeski, the global head of macro at ING.
Annually, German manufacturing output after calendar adjustment was stable, against the revised 0.9% decrease in January. Excluding energy and construction, industrial production in February slipped 0.1% on the month and 0.6% on the year.
In energy-intensive industries, which account for 17% of industrial gross value, production expanded 1.9% month over month and 0.1% on a yearly basis. Consumer goods production fell 1.5% sequentially, while the output of intermediate goods and capital goods rose by 0.4% and 0.1%, respectively. Germany, one of Europe's largest net importers of energy, clocked a 0.3% monthly gain in energy production in February.
"All in all, February's macro data shows that even without the war in the Middle East, the German economy was unfortunately on track for yet another quarter of contraction. To make things worse, the war in the Middle East, no matter how sustainable yesterday's announced ceasefire will prove to be, will leave clear marks on the German economy over the next few months. As much as we were hoping to finally comment on some good economic news from Germany, it is a bit like waiting for a German train these days: definitely delayed and uncertain whether it will ever arrive," Brzeski concluded.