FXStreet (Barcelona) – Carsten Brzeski of ING, reviews the German industrial production data release, noting although the stable number in May still points to a expansion in the economy, June data will give a more clear picture.
Key Quotes
“German industrial production remained stable in May, after it had increased by 0.6% MoM in April. On the year, industrial production was still up by 2.2%. While the production of capital and consumer goods increased in May, the energy sector and the construction sector turned out to be a drag on the industry.”
“Despite the May stagnation, industrial production still points to an expansion of the economy in the second quarter, admittedly a meager one. Already yesterday, German new orders slipped back somewhat in May, dropping by 0.2% MoM. The drop came after strong growth of 2.2% MoM in April. The drop in new orders was mainly drive by weaker domestic demand. Foreign demand came only from countries outside the Eurozone, suggesting that the weak euro has finally reached the German industry.”
“The latest episodes of the Greek crisis have not, yet, affected the German economy. Even confidence indicators have remained at relatively high levels. In fact, details of today’s and yesterday’s data suggest that the May weakness of the German industry is rather the result of public holidays and bridge days, than the first fallout of the Greek crisis. Nevertheless, the performance of industrial production since the beginning of the year has not been impressive. The impact from lower energy prices and the weaker euro has up to now been weaker than initially expected.”
“Looking ahead, we will have to wait until the June data to get a better impression of the real underlying momentum of the German economy. Currently, the fundamentals of the German economy remain solid. Order books are richly filled, inventories have dropped and the labour market continues to be strong. Many arguments for a strong second half of the year. However, past experiences have shown that Greek Eurozone turmoil always hits the German economy with a slight delay. Therefore, the latest events and further days of uncertainty could spoil a German growth party in the months ahead.”
(Market News Provided by FXstreet)