German industrial production remained on hold in February. What’s more disappointing is the downward revision of the January number to a meagre growth of 0.1% MoM, from initially 0.6% MoM. While the production of capital goods increased by 1.5% MoM, the production of consumer goods dropped by 2.3% MoM. At the same time, the construction sector was not, yet, able to shrug off the impact from the harsh winter, only increasing by 1%, from a 14.2% decline in February.
Today’s disappointing industrial production numbers have increased the likelihood of another weak quarter after the economy’s standstill in the fourth quarter.
Looking ahead, unless March has some real good surprises in the offing, strong growth will only return in the second quarter. However, there is hardly any reason to become pessimistic again. All ingredients for a catching up of the economy are there. The largest part of the government’s public investment programs still has to reach the economy. Moreover, order books are filling, business expectations are approaching historical highs and employment has grown actually grown in the first quarter. The first quarter weakness was temporary, not structural. It simply takes a while before the economy gets rid of the snow blanket.