Germany: Downside risks contradicted - Rabobank

According to Rabobank analysts, data from Germany this morning seemingly contradicted the downside risks highlighted above, but when you dig deeper, a different picture emerges.

Key Quotes

“In contrast to yesterday’s astonishingly weak German factory orders for February, industrial output for that same month actually rose 0.7%, largely offsetting the drop in production in the first month of the year.”

“At least this takes the sharp edges of yesterday’s numbers, although we need to bear in mind that whilst the orders data tend to be more volatile, the causality usually runs from orders to output rather than the other way around. Moreover, digging deeper into the details shows that it was the construction sector that saved the day, reporting a 6.8% m/m increase in output.”

“Since the average daily temperature in Germany was 5.8 degrees higher than in the same month last year, this probably goes quite some way in explaining the boost in construction output. Excluding the construction sector, output fell by 0.4% m/m and this seems to be a better fit with the recent data on orders as well as purchasing managers’ indices. In other words, don’t get too excited yet.”