German factories dash hopes of swift recovery after weaker July
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.