German industry emerges from recession and is set up for a brighter outlook

BNP Paribas Team BNP Paribas

After two quarters of contraction, German industrial output rose by +0.9 % q/q in Q4, despite a December decline (-1.9 % m/m). That decline, driven mainly by the automotive sector, hides ongoing improvements in most other parts of the industry. Those gains are expected to deepen in coming months thanks to a sharp rebound in new orders for capital goods. We see this as signaling the start of a fresh industrial cycle that is increasingly powered by domestic demand. At the same time, a recovery in exports is starting to take shape, with a solid December figure and a pickup in new foreign orders - though the rebound is not as strong as on the home front.

Industrial production: A misleading decline

Industrial production (manufacturing, energy, construction) fell in December (-1.9% m/m), but not enough to erase the gains recorded during the two preceding months (+0.9% Q4/Q3). Manufacturing output slipped further in December (-3% m/m) but still posted a 0.9 % increase q/q. The decline was driven primarily by the automotive sector (-8.9% m/m) and industrial maintenance (-8% m/m). In contrast, most other industrial segments grew: transport equipment (+11.1% m/m), metal products (+2.4%) and electronics (+3.1%). Construction output also rose sharply in December and Q4 (+3% m/m; +1.9% q/q), including civil engineering, which grew by 1.7% q/q in Q4, its best quarter since the series began (1991).

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BNP Paribas Team

BNP Paribas

BNP Paribas Economic Research Department is a worldwide function, part of Corporate and Investment Banking, at the service of both the Bank and its customers.

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