Germany's monthly industrial production missed market expectations in July amid a slump in automotive output, provisional data from the Federal Statistical Office showed Monday.
Seasonally and calendar-adjusted industrial output in July was down 1.1% month on month, following a revised zero growth earlier and below the consensus estimate of a 0.1% gain. On an annual basis, calendar-adjusted industrial production fell 1.6%, compared with the revised 0.5% decrease in the previous month.
According to Destatis, the downturn was primarily led by a 9.2% month-over-month drop in automotive production, likely triggered by a multi-week factory shutdown. Conversely, increased wind and photovoltaic generation powered a 4.7% increase in energy output, helping boost overall production.
Meanwhile, there was a modest 0.4% rise for the May to July period versus the previous three-month average.
"This morning's industrial production data is a good reminder of how fragile the cyclical recovery of the German economy is. The first half of the year had seen remarkable resilience, driven by fiscal stimulus finally filtering through to the economy, but also a resilience driven by the government's tax rebate on gasoline for two months. Finally, the fact that other regions were hit harder by the closure of the Strait of Hormuz had made some German companies a kind of crisis beneficiary, as orders were rechannelled from Asia to Europe and in particular Germany," ING said in a note.
"Looking ahead, the war in the Middle East, which is slowly turning into a forever war, keeping oil prices at elevated levels, as well as the likely upcoming shock of higher gas prices in the next heating season and renewed trade tensions, pose risks to the German outlook," ING added, noting that dropping water levels in key transport corridors pose additional risk to manufacturing output and supply chains.
