German Industrial Output Rises More Than Expected in February

Facts

• After growing 3.7% in January, German industrial production rose for a second consecutive month in February, jumping 2% from the previous month at a significantly higher percentage than the 0.1% increase analysts expected.¹
• According to the German statistics office Destatis, the country's industrial production has now risen 5.8% since December and is 0.6% above the levels seen a year earlier. This includes a month-over-month manufacturing increase of 2.4%, most notably 7.6% in its largest sector of motor vehicle production.²
• Franziska Palmas, a senior Europe economist at Capital Economics, said the surprise increase in production should continue to be supported by 'a high backlog of orders, lower energy prices, and easing supply constraints...'¹
• Destatis reported that construction output also rose by 1.5% in February, likely boosted by the mild winter weather, though energy fell by 1.1%. Manufacturing is benefiting from lower energy prices and easing supply-chain bottlenecks, but uncertainty remains as increasing interest rates weigh on demand.²
• The manufacturing report comes as the production of capital goods rose 3.4%, intermediate goods 1.8%, and consumer goods 1.4% in the same period.³

Sources: ¹Reuters, ²Marketwatch and ³Archive.

Narratives

• Narrative A, as provided by The local germany. Though it's being reported as such, this report shouldn't be much of a surprise given recent policy trends in Germany and the EU. Measures such as transitioning to clean energy vehicles and capping gas and electricity prices, combined with the mild winter, have enabled the economy to avoid the worst of the energy and supply chain crises. Though inflation will still be an issue this year, Germans should be more hopeful than previously told.
• Narrative B, as provided by Reuters. Despite the positive outlook portrayed in this report, 41.6% of German manufacturing companies said in March that they're still facing supply chain issues. On top of that, over 60% of manufacturers of machinery and equipment, electrical and electronics companies, and automakers reported bottlenecks in raw materials and intermediate products. Germany has a long way to go before its manufacturing industry can truly take a breath from this complex crisis.