Ger­man fac­to­ries dash hopes of swift re­cov­ery af­ter weaker July

The Daily Telegraph - Business - - Business - By Lizzy Bur­den

THE re­bound in Ger­man fac­tory out­put lost steam in July, sug­gest­ing Europe’s largest econ­omy faces a slow re­turn to pre-pan­demic lev­els of ac­tiv­ity.

In­dus­trial pro­duc­tion rose 1.2pc in July com­pared to the month be­fore, a sig­nif­i­cant drop from the 9.3pc in­crease recorded in June, ac­cord­ing to Des­tatis, the sta­tis­tics agency. It was also well be­low the 4.5pc jump an­a­lysts had ex­pected.

“This is quite a dis­ap­point­ment,” Jens-Oliver Nik­lasch, an an­a­lyst at LBBW, a Ger­man bank, said. “The fact re­mains that there will not be a re­turn to pre-cri­sis lev­els any time soon.”

Ger­many’s dom­i­nant au­to­mo­tive man­u­fac­tur­ing sec­tor drove growth, with out­put ris­ing 6.9pc, but con­struc­tion fell 4.3pc, partly due to the sum­mer break. In­dus­trial pro­duc­tion has been claw­ing back its losses for three straight months but is still 10pc lower than in July last year, and 10.8pc be­low pre-pan­demic lev­els in Fe­bru­ary.

“We ex­pect pro­duc­tion to in­crease again in Au­gust, but we now seem to be past the pe­riod of rapid catch-up growth,” Jack Allen-Reynolds, econ­o­mist at Cap­i­tal Eco­nom­ics, said.

Carsten Brzeski, chief eu­ro­zone econ­o­mist at ING, said: “The Ger­man econ­omy re­mains on track for a strong surge in the third quar­ter. It is too early to tell how much mo­men­tum will be left there­after.”

Ger­many has weath­ered the pan­demic bet­ter than many of its big Euro­pean neigh­bours, largely be­cause it kept fac­to­ries open dur­ing a six-week lock­down. The gov­ern­ment has also in­jected a mas­sive fis­cal stim­u­lus.

Peter Alt­maier, the Ger­man econ­omy min­is­ter, said last week that the econ­omy was in the midst of a V-shaped re­bound, but warned a sec­ond ma­jor wave of coro­n­avirus in­fec­tions re­mained a risk.

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