Germany: Relief from macro data - ING

Carsten Brzeski, Chief Economist at ING, notes that German industrial production increased by 1.0% month-on-month in March, from -1.7% MoM in February and on the year, industrial production was up by 3.2%.

Key Quotes

“Growth was almost equally spread across all sectors. Notably, even though activity in the construction sector increased by 0.6% MoM, the overall performance of the construction sector since April last year has been disappointing.”

“At the same time, trade data brought more relief but did little to hush international criticism of the German trade surplus. Exports increased by 1.7% MoM, from -3.2% MoM in February. As imports dropped by 0.9% MoM, the trade surplus widened significantly to 25.2bn euro, close to the all-time high from March 2016. Obviously, talks about trade sanctions have been nothing more than talks so far and have not left any marks on the German export sector, yet.”

“Start of a downturn?

Disappointing data, both soft and hard, since the start of the year, have cast doubt on the strength of the German economy and invited speculation about the beginning of a possible downswing of both the German and the Eurozone economy. While uncertainties and downside risks have indeed increased recently, there is, in our view, little reason to doubt the underlying strength of the current recovery.”

“All in all, the German economy is currently in the middle of a difficult combination of negative one-offs; dropping optimism and strong fundamentals. To a large extent, distorted by weather effects, the timing of vacation, the flu and strikes, next week’s GDP data could show the weakest growth performance of the German economy since 3Q 2016. Today’s positive macro data will probably be the famous “too little, too late”. However, it should be enough to transform an almost disastrous start to the new year into a minor incident.”