German IP Falls by 0.2% in May
German IP fell by 0.2% in May as manufacturing IP rose by 0.2%. Manufacturing and headline IP both show sequential deterioration in play for their annualized rates of growth from 12-months to 6-months to 3-months. Consumer goods and capital goods output both show secular growth rate deterioration while intermediate goods show only a very minor deviation from that same pattern.
Real manufacturing orders and real sales both show more complex patterns.
The IFO headline for manufacturing and the gauge for expectations both show secular improvement from 12-months to 6-months to 3-months. The ZEW current index shows persistent negative readings, but they show progressive improvement. The EU Commission industrial index shows secular deterioration.
Other early European reporters show different results. France and Spain show ongoing sequential improvement in their output trends for IP. Portugal and Norway show sequential deterioration while Sweden shows a mixed pattern.
There are 17 quarter-to-date calculations in the table. Ten of them show negative growth in progress. Overall, German IP, manufacturing IP and real German orders log negative readings for the quarter to date. The ZEW current treading, as well as France and Sweden, log positive readings along with two key German sectors: capital goods and consumer goods.
Nine of 17 queue rankings show standings below their respective 50 percentile, a level that marks the median value for each series. The weakest percentile standings are for the intermediate goods sector for German manufacturing, the two IFO series (that are more upbeat- but from this lower ranking position) and IP in Portugal.
Twelve of 17 measures show weaker conditions in May 2023 that existed in January 2020 before Covid struck.
On balance, there is a good deal of weakness in German IP and in the related measures we present in the table. Despite that, there is also considerable unevenness afoot. However, there are too many important sectors, measures, and overarching data showing secular deterioration for that to be ignored. Weakness seems to proliferate the industrial sector albeit amid some pockets of strength. German output is particularly pressured. Perhaps this means that ECB rate hikes will not have to go as far to bring inflation back into line.
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
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