Jul 07, 2022 03:00AM ET
By: AnalysisWatch
German industrial production rose in May, despite a sharp drop in energy output at a time when Europe's largest economy is facing a worsening supply crisis.
Production rose 0.2% on the month, less than the 0.4% expected. However, statistics agency Destatis revised April's figures upward to show a 1.3% increase instead of the 0.6% initially reported. With the upward revision to the monthly base, the level of output was in line with or even slightly above expectations.
The figures showed the impact of the worsening energy supply crisis, as energy production fell by 5.8% on the month, even after adjusting for seasonal effects. Production of consumer goods also fell by 0.9%, indicating a further shift in spending patterns back to their pre-pandemic nature. In contrast, the production of capital goods increased by 2.2% and that of construction by 0.4%.
Overall, production was down 1.5% on the year, according to Destatis, weighed down by component shortages and the closure of Chinese ports during the spring due to COVID-19 blockades, which "continue to cause problems in processing orders."
"Despite today's small increase, industrial production remains too weak to be a growth driver," ING analyst Carsten Brzeski said in a note to clients. "The main question is no longer whether the economy could contract this year, but for how long it will be in recession territory."
"We won't have to wait until winter for the energy crisis to worsen further," he said. "The government's decisions to bail out an energy company and to change the so-called price adjustment mechanism, which allows companies to pass on costs to the consumer, as well as the fact that NordStream 1 will be temporarily out of service as of next Monday, are just a few illustrations of what could become a perfect storm."