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7 Nov 2014
German Industrial production rebounds in September - ING
FXStreet (Łódź) - Carsten Brzeski from ING suggests that the positive German Industrial Production data for September still didn't succeed in dispelling recession fears.
Key quotes
"According to this morning’s data, German industrial production increased by 1.4% MoM in September, from a 3.1% drop in August. The rebound was mainly driven by manufacturing (+1.7% MoM), capital goods (4.5% MoM) and energy (+2.4% MoM)."
"Activity in the construction sector dropped for the second month in a row (-1.2% MoM). At the same time, exports rebounded sharply in September, increasing by 5.5% MoM, almost offsetting the 5.8% drop in August. As imports also increased by 5.4% MoM, the seasonally-adjusted trade balance widened to 18.5bn euro, from 17.5bn in August."
"Over the last weeks and months, the German economy has been a mystery. The slowdown story which was told by partly terrifying data, particularly from industrial activity, has not always matched gut feeling, anecdotal evidence and undebatable solid economic fundamentals. Nevertheless, it would be naïve to simply deny clearly disappointing data."
"At the current juncture, however, and from an analytical point of view, it is still too early to come up with an all-encompassing explanation for what is happening right now in the German economy. Is the slowdown mainly the result of an abnormal volatility caused by weather effects, vacation days and the timing of school summer holidays?"
"Or is the current slowdown the result of several weaknesses in many trading partners and, even more important, the gradual end of the positive reform-growth cycle the economy has been in for the last decade? In our view, it is a combination of the two.
"With today’s data, bets can be placed for next week’s Q3 GDP reading. It is not an easy bet. Today’s rebound suggests that some of the vacation-inclined weakness is disappearing, now that most Germans are finally back at work. However, the rebound was not strong enough to take away all concerns about another contraction of the economy in the third quarter (and consequently a technical recession)."
Key quotes
"According to this morning’s data, German industrial production increased by 1.4% MoM in September, from a 3.1% drop in August. The rebound was mainly driven by manufacturing (+1.7% MoM), capital goods (4.5% MoM) and energy (+2.4% MoM)."
"Activity in the construction sector dropped for the second month in a row (-1.2% MoM). At the same time, exports rebounded sharply in September, increasing by 5.5% MoM, almost offsetting the 5.8% drop in August. As imports also increased by 5.4% MoM, the seasonally-adjusted trade balance widened to 18.5bn euro, from 17.5bn in August."
"Over the last weeks and months, the German economy has been a mystery. The slowdown story which was told by partly terrifying data, particularly from industrial activity, has not always matched gut feeling, anecdotal evidence and undebatable solid economic fundamentals. Nevertheless, it would be naïve to simply deny clearly disappointing data."
"At the current juncture, however, and from an analytical point of view, it is still too early to come up with an all-encompassing explanation for what is happening right now in the German economy. Is the slowdown mainly the result of an abnormal volatility caused by weather effects, vacation days and the timing of school summer holidays?"
"Or is the current slowdown the result of several weaknesses in many trading partners and, even more important, the gradual end of the positive reform-growth cycle the economy has been in for the last decade? In our view, it is a combination of the two.
"With today’s data, bets can be placed for next week’s Q3 GDP reading. It is not an easy bet. Today’s rebound suggests that some of the vacation-inclined weakness is disappearing, now that most Germans are finally back at work. However, the rebound was not strong enough to take away all concerns about another contraction of the economy in the third quarter (and consequently a technical recession)."