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German industrial production falls in September, trend for months ahead continue to point downwards

German industrial production dropped 0.6 percent in September, as compared with prior month’s rise of 0.4 percent and consensus expectations of a fall of 0.4 percent. In the manufacturing sector, production dropped even stronger by 1.3 percent. Today’s data highlights the expectations that the GDP data is likely to show a slight contraction for the September quarter. Also, the trend for the months ahead is still pointing downwards, stated Commerzbank.

This signifies that production in the third quarter dropped 1.1 percent on a quarter-on-quarter basis, both for the producing sector, which includes construction and energy, and for the manufacturing sector. This was slightly less pronounced than in the second quarter. However, the figures underpin the expectation that real GDP contracted a bit in the third quarter as well, thus fulfilling a frequently used definition of a recession, said Commerzbank in a research report.

The recent development of incoming orders gives at least some hope. In September their core measure rose for the second consecutive month. However, a rapid turnaround in production is unlikely.

“On the one hand, business sentiment remains poor. On the other hand, the trend for production calculated by us on the basis of orders in the past months continues to point downwards, so that a slight drop in production can also be expected for Q4”, added Commerzbank.

By Aditi Awati
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