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EUROPE ECONOMICS: Daiwa Sees German Manufacturing Slowing This Year Despite December's Industrial Production Rise

· 02/08/2021 01:47

06:47 AM EST, 02/08/2021 (MT Newswires) -- Daiwa Capital Markets said that the run of seven consecutive monthly increases in German industrial production (IP) came to an end in December, as overall output was unchanged from November.

While that meant that Monday's IP was still down 0.7% y/y and 3.6% below last February's pre-COVID-19 level, it was also up a marked 6.2% q/q over Q4 as a whole having risen 10.5% q/q in Q3. In addition, the output of manufacturing and mining did grow again, rising 0.9% m/m, although still down 3.8% from the pre-pandemic level.

Within the detail, production of autos rose a further 1.2% m/m to be 3.8% below February's pre-pandemic level, while the output of chemicals (up 3.4% m/m), pharmaceuticals (4.2% m/m) and metals (up 1.9% m/m) also saw continued growth although remaining below the pre-pandemic level.

The output of consumer goods overall rose for the first time since September, up 2.6% m/m to be about 5% below February's level. Production of machinery, however, dropped 2.4% m/m to be almost 10% below the pre-pandemic level.

Beyond the manufacturing sector, construction output dropped 3.2% m/m but remained above the pre-COVID level and up 4.0% q/q. Energy output also dropped, falling 2.9% m/m, but was up 4.5% q/q albeit still more than 5% below the pre-pandemic level.

Looking ahead, the drop in German factory orders in December tallied with survey evidence that Daiwa predicted softer growth in manufacturing in Q1 2021, with auto production, in particular, to be weighed by the hit to domestic demand from the reversal of last summer's temporary VAT (sales tax) cut as well as supply-chain problems associated with global semiconductor supply.