Euro Macro: German output still 11% below pre-Covid levels – Data for industrial production and industrial orders have indicated that activity in Germany’s industrial sector has remained stuck well below pre-Covid levels. During the peak of the Covid-19 crisis (March and April), total production dropped by almost 25% in Germany. This drop was relatively modest compared other big eurozone countries (e.g. France -34%, Italy – 43% and Spain -33%), as the lockdown measures in Germany were less stringent and allowed some continuation in production. Since the end of the lockdown measures, Germany’s production has bounced back sharply (+ 17% in total in May and June), but the recovery slowed down considerably in July, with production rising by merely 1.2% mom. As a result, the level of activity was still almost 11% below the pre-Covid level in July.
When looking at the break-down of the main components, the sharpest drops since the start of the pandemic were registered in production of intermediate goods and capital goods (each around 13% lower in July than in February), which are the most export-driven parts of the industrial sector. The more domestically orientated production of consumer goods fell by 6.5% during the same period. Recent data for industrial orders confirm the view that Germany’s industrial sector still shows considerable weakness (level 8% below pre-Covid in July), although in the orders data the weakness is more heavily concentrated in intermediate goods (-11%) than in capital and consumer goods (each -6.5%). Looking forward, we expect production growth to remain subdued in the coming months and to pick up more noticeably in the course of next year, when global trade growth is expected to gather momentum. (Aline Schuiling)