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Financial News: Will German Industrial Production Rebound Help Avoid A

Will German Industrial Production Rebound Help Avoid A Recession?

01/09/2023 - 05:39:00 (RTTNews)

(RTTNews) - Germany's industrial production recovered at a faster than expected pace in November, underpinned by higher output of energy-intensive industries, but the weaker rate of growth suggest the biggest euro area economy slid into a mild recession in the final three months of 2022.

Industrial production grew 0.2 percent from October, when output decreased a revised 0.4 percent, Destatis reported. Production was expected to gain 0.1 percent. Excluding energy and construction, industrial production gained 0.5 percent.

Within total industry, intermediate goods and capital goods output grew 1.1 percent and 0.7 percent, respectively. By contrast, consumer goods output fell 1.5 percent.

Energy production advanced 3.0 percent month-on-month, while construction output dropped 2.2 percent.

On a yearly basis, industrial production dropped 0.4 percent in November, data showed. Data released last week showed that factory orders posted its biggest fall in more than a year in November on a sharp contraction in foreign demand. Orders declined 5.3 percent in November.

Exports decline unexpectedly in November, due to weak global demand. Industrial output has remained resilient in the face of the energy crisis, Capital Economics' economist Franziska Palmas, said. The recent slump in gas prices should help energy-intensive firms.

On balance, the economist said industrial output is likely to weaken in the coming months as the headwinds on industry from past rate hikes and cooling domestic and external demand are set to intensify.

ING economist Carsten Brzeski said the industrial activity in November provided more evidence that the German economy did not fall off a cliff in the fourth quarter but was not strong enough to avoid a contraction either.

"Despite the recent return of optimism as illustrated by improving sentiment indicators, the sharp drop in new orders, the inventory build-up in recent months, the lagged impact of high energy prices and potential supply chain frictions as a result of China's Covid policies all bode ill for the short-term outlook," Brzeski added.

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