While Brexit concerns are potentially responsible for sterling volatility on Friday, no such bad news for the German economy which reported robust industrial production figures for August well ahead of expectations.
Production rose 2.5 per cent month-on-month, compared to economists’ predictions of a 1 per cent rise. In July production had fallen 1.5 per cent. The series has now been in positive territory for four out of eight months reported for 2016 so far.
Year-on-year, production rose 1.9 per cent, in comparison to forecasts for a 0.4 per cent rise. In July it had fallen 1.3 per cent – a downward revision from the -1.2 per cent originally-stated.
Still all in all, a good month for the eurozone’s largest economy. Destatis, Germany’s statistics office, said:
In August 2016, production in industry excluding energy and construction was up by 3.3%. Within industry, the production of capital goods increased by 4.7% and the production of consumer goods by 3.3%.The production of intermediate goods showed an increase by 1.6%. Energy production was up by 1.1% in August 2016 and the production in construction decreased by 1.2%.
However concerns are still growing over the strength of the economy after the UK’s vote in June to leave the EU.
The head of DIHK, the German chamber of commerce and industry, recently told the FT that delays in launching the UK’s Brexit negotiations are prolonging uncertainty. German trade data also shrank markedly in July, with a 10 per cent year-on-year decline in exports the biggest since 2009. GDP growth is also expected to slow in the third quarter.
Claus Vistesen at Pantheon Macroeconomics, was impressed by August’s results but advocated a wait-and-see approach:
In one line: Surging, but a good September is needed to get excited about Q3 as a whole.
This is a very strong report, but we warn that such outliers often are revised down slightly. As it is, however, these data suggest that German manufacturing revved up over the summer after a sluggish start to Q3.
Overall, this headline adds support to our view that industrial output likely rebounded quarter-on-quarter in Q3, following a poor Q2. But we need to see a decent September report to get really excited, and odds are that this will be difficult to achieve.