Carsten Brzeski, chief economist at ING, points out that the German industry had a disappointing start to the second quarter as both industrial production and trade fell in April.
“Industrial production fell by a sharp 1.9% month-on-month in April, from 0.5% MoM in March, the first drop since January this year. On the year, industrial production was down by 1.8%. Production in all sectors dropped, except for activity in the construction sector.”
“At the same time, German exports (seasonally and calendar adjusted) fell like a stone, dropping by 3.7% MoM in April, from 1.6% MoM in March. Imports decreased by 1.3% MoM, from 0.4% MoM in March. As a result, the trade balance shrank to €17.94 billion in April from €22.6 billion in March.”
“Let’s be clear, this is a horrible start to the second quarter for German industry, as global trade tensions as well as temporary problems in the automotive sector and chemical industry have left their marks. One-off factors should have disappeared by now and even turned into temporary positives.”
“Looking ahead, the past has often shown that a single month is clearly not a good illustration of German industry or the entire economy. The April data could even be partly distorted by seasonal effects. However, there is no doubt that the German economy had a disappointing start to the second quarter, justifying the European Central Bank's new dovishness. It now needs even stronger domestic demand and a bounceback in May and June to avoid a return to recessionary territory.”
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