German industrial production falls in December, weakness in EM weighs on manufacturing

Germany's industrial production declined again in December, dropping by 1.2% m/m. This highlights that the manufacturing in the country is greatly being impacted by the weakness in emerging markets (EM). Usually, December figures are very much influenced by how the Christmas holidays fall, while the usual positive orders and sales figures lead to a significant rebound in production in January. However, the German economy is expected to have grown just by little in Q4 2015.

Apart from the inconsistency between production and sales in December, the 0.2% fall in construction output also suggests the above-average negative calendar effect.  Hence a significant rebound in production is likely to take place in the coming months. The figures do not give any positive outlook for Q4 2015. Industrial production in Q4 was 0.3% weaker than in Q3, while nominal exports also declined 1.5% in Q4. This suggests that net trade subtracted points from the GDP growth.

"Against this backdrop we would expect no more than a slight gain in real GDP. This in turn supports our 2016 growth forecast of 1.3%, which is well below the consensus (1.8%)", says Commerzbank.