Industrial Production Declines More Than Expected in Germany And U.K.: Increases in Norway

Data on May industrial production for Germany, the United Kingdom and Norway were released today.

Industrial production in Germany and in the UK declined more sharply in May than the consensus in each country had expected. In Germany, the decline from April to May was 2.4% compared with a consensus expectation of a 0.5% decline. The actual decline was the steepest decline since August, 1997. Part of the decline may have been due to the fact that many workers took two days off between a Wednesday holiday and the weekend. In the UK, the decline was 0.8% compared with a consensus estimated decline of 0.2%.

In contrast to the May declines in Germany and the UK, industrial production in Norway rose 1.7%. The longer term trends in industrial production in the three countries are shown in the first chart. (The original base for Norway's index (1995=100) and the UK's, (2003=100) have been changed to (2000=100) to facilitate comparison with Germany, whose base is (2000=100).) Since 2004, the trend in industrial production in Germany has been sharply upwards while those in the U.K. and Norway have tended downward.

Manufacturing is much more important in the German economy than it is in either of the economies of the U.K. or Norway. The second chart shows the importance of manufacturing in the three countries. In Germany the ratio of manufacturing to Gross Value Added has been relatively steady over the past ten years, just below 24%. In the U.K. the share of manufacturing has declined steadily as the service sector has increased. Manufacturing is currently only about 13% of the total economy. In Norway oil and gas extraction and services dominate the economy and manufacturing plays a small roll, accounting for only about 9% of the economy.