German industry output recovers in June, but unlikely to contribute much to Q2 growth

Data from the Economy Ministry showed on Monday that German industrial output rose 0.8 percent on the month in June, beating consensus forecast of 0.7 percent in a Reuters poll and compared to the May reading which was revised up to a fall of 0.9 percent.

After a lacklustre spring, Germany’s factory sector bounced back in June. In the second quarter as a whole, industrial output contracted by 1.0 percent. The decline in output over the second quarter signals the least contribution to economic growth, leaving private spending as a source for expansion.

“The increase, however, comes too late to make a disappointing quarter for the German industry a good one,” said ING economist Carsten Brzeski.

A Reuters poll forecasts 0.3 percent growth in the German economy in the second quarter, data for which are due to be released on August 12. Foreign trade, which was the main driver of German growth, looks unlikely to inject fresh dynamism into the economy as the modest development in orders and uncertainty generated by Britain's vote in June to leave the European Union cloud the trading outlook.

"Increased uncertainty about the future of Europe and the euro zone in wake of the Brexit vote should in our view leave some marks on German industrial activity over the coming months," said ING economist Carsten Brzeski.