German industrial production increased significantly in March, more than offsetting the winter dip. Industrial production was up by 4.0% MoM, from -0.2% in February. The increase was mainly driven by the production of capital and intermediate goods, and above all by the construction sector. As expected, after the end of the winter, the construction sector bounced back impressively by 26.7%.
Today’s numbers clearly illustrate that the industry’s hibernation has ended. With today’s strong increase in industrial production numbers, chances have increased that next week’s first estimate of Q1 GDP growth could be slightly positive. Whether positive or negative, the first quarter was not a good reflection of the sound underlying recovery. It will take until the second quarter before the real strength of the recovery will be visible.
With filling order books, business expectations back at pre-crisis level and increasing recruitment plans, the near term future for the German economy looks bright. However, the ongoing sovereign debt crisis will very likely also take its toll on the German economy. Therefore, it will be hard to take the current impressive momentum into the summer months. Enjoy it as long as it lasts.