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.
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.