Germany – industry turned around despite April drop

Following yesterday's positive figures on industrial orders in April, the 1.4% decline in industrial production may come as a disappointment to some. However, when assessing these figures, it should be borne in mind that output rose by more than 2% in March, which was boosted by a number of special factors. In view of the impending US tariffs, some companies may have brought forward production in order to deliver goods to the US at lower tariff rates. In addition, Easter was relatively late this year, so the Easter holidays had less of an negative impact on production in March than is usually the case. In April, these effects tended to hamper production, so that the April figures are likely to understate the underlying trend somewhat. Against this backdrop, it is certainly positive that April production was only slightly below the first-quarter average (Chart 1). The May figure is likely to be higher again, so that production is expected to show an increase for the second quarter as a whole.

Today's figures therefore certainly support the expectation that industry has passed the worst. This is indicated not only by the recent improvement in order figures, but also by the slightly better mood among companies, as reflected in the rise in the Ifo business climate index. We therefore expect the German economy to pick up again in the coming quarters, even if higher US tariffs and structural problems in the German economy will prevent a strong upturn.

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