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German industrial output increased a little in July as rebound slows

Jill Petzinger
·Germany Correspondent, Yahoo Finance UK
·2-min read
07 August 2020, Mecklenburg-Western Pomerania, Torgelow: An employee cleans a core pressed from sand in the mould construction area of the Torgelow iron foundry. The company, which with 320 employees is one of the most important employers in Western Pomerania, had filed for insolvency in mid-July. Photo: Jens Büttner/dpa-Zentralbild/ZB (Photo by Jens Büttner/picture alliance via Getty Images)
07 August 2020, Mecklenburg-Western Pomerania, Torgelow: An employee works in the mould construction area of the Torgelow iron foundry, which filed for insolvency in mid-July. Photo: Jens Büttner/picture alliance via Getty Images

Germany’s manufacturing firms recorded a rise in production for the third month in a row in July.

However, the 1.2% month-on-month growth in industrial output fell significantly below economists’ expectations of around 4.7% growth.

July data from the Federal Bureau of Statistics revealed a loss of momentum compared to immediate post-lockdown months of May and June, when production rose by 7.4% and 9.3% respectively.

“The improved mood among companies and the reduction in short-time work suggest that the recovery process will continue in the coming months, although it may take some time,” the federal economics ministry said, noting that German industry is back at nearly 90% of its pre-crisis levels.

Production in the key automotive sector got a nearly 7% month-on-month boost in July, but is still 15% under pre-pandemic levels.

READ MORE: Automotive industry no longer growth engine of German economy

The Ifo economic institute’s index on industry expectations showed a rise in August, to 15.4 points from 14.3 in July.

“The engine of the German economy— industry — is gradually getting back on its feet,” wrote Ifo survey head Klaus Wohlrabe.

For the first time in a year or so, machine-builders expect production to expand again, and expectations in metal production and processing showed a positive reading for the first time in almost two years with plus 5 points, up from minus 11 in July.

Automotive companies continue to expect an increase in their production but are not quite as optimistic as they were in July, according to the Ifo index.

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

A separate study from the German economic institute on Monday said that the powerful car industry is now no longer the main engine for of the country’s economy. It is struggling with a collapse in demand from the COVID-19 pandemic, and is also contending with the switch to electrification, which threatens traditional auto supplier firms and puts jobs in jeopardy.