The German industrial production index dropped in May bu -1.4% compared to April. Carryover growth for the second quarter is negative at -1.1%. It has to be compared to a 0.8% growth during the first quarter (non annualized figures)
3 remarks:1 – On the first chart we notice that the index is almost flat since the beginning of 2011. There is a strong divergence with the American one. Is there a problem of competitiveness in Germany?
2 – This change in trend was already seen in surveys. The chart on the left (below) shows that the industrial component of the IFO survey was not growing since the first quarter. On the right the chart of the PMI survey shows that the peak was seen in January.
3 – Exports’ momentum is weaker and according to the New Orders Index profile, the trend will not change spontaneously. In other words, an impulse from external demand that could change industrial production cannot be expected rapidly.
The German economy is now on a slower momentum. The peak was certainly seen at the turn of the year. The impulse from Germany to the rest of Europe will be limited and that’s worrisome.
