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Germany

Industry starts the second quarter on a weak note

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Industrial production fell by a seasonally-adjusted 1.7% in April compared to the previous month. Production is thus 1% below the average level of the first quarter. All sub-sectors of industry recorded significant month-over-month declines. Consumer goods (-2.1%) and investment goods (-2%) showed the strongest downward movements. Outside industry, however, the construction sector expanded strongly with an increase of 3.3%.

Allianz SE
Munich, Jun 08, 2018

With today's April data, the Federal Statistical Office also published revised data for the month of March, according to which industry grew significantly more strongly at the end of the first quarter than was initially reported. However, this does not change the fact that the German industrial sector made a weak start to the second quarter.

Following the subdued growth in the first quarter, we expect a more vivid macroeconomic activity in the further course of the year. In principle, the domestic economic conditions for a continuation of the upswing remain very good. The earnings situation in the corporate sector is positive, financing conditions are exceptionally favorable, the debt of companies and households is relatively low, high capacity utilization promotes investment demand, job creation generates additional income and real purchasing power of disposable incomes is growing despite higher oil prices.

However, there is no doubt that the downside risks for this year's real GDP growth forecast of 2.1% have increased due to the weak start to the second quarter. Uncertainty about the future economic prospects – particularly in context with the trade dispute with the US – has increased sharply in recent months. This uncertainty is also likely to have played a role in the significant order decline in April. Seasonally and calendar-adjusted, the decrease was 2.5% compared to the previous month.

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