Germany’s manufacturing production likely drove industrial output in May; exports to have grown 0.5 pct

Germany’s industrial production is expected to have remained muted in the second quarter, following a strong beginning to 2016. In a Societe Generale’s research report, industrial production in the country is likely to have grown 0.4 percent on sequential basis in May, predominantly driven by manufacturing production.

Even if the industrial production is likely to have continued its growth in June, the quarterly growth rate is not expected to surpass much more than 0.3 percent quarter-on-quarter, a slowdown from 1.8 percent recorded in the first quarter, added Societe Generale.

However, with factory orders expected to be better than anticipated in the second quarter, industrial output might hold up relatively well in the third quarter, with the Brexit uncertainty shock expected to begin biting more materially after the summer, according to Societe Generale. Production in construction is likely to have a better chance to perform well in the second half of 2016 after the rebound in the second quarter.

Meanwhile, Germany’s exports are likely to have growth 0.5 percent on sequential basis in May, whereas imports are expected to have gained 0.8 percent, said Societe Generale.

Headwinds from foreign demand seemed to have slowed and even turned. This is likely to help in a solid rebound in the contribution of net exports in the second quarter. However, the outlook is likely to be impacted from the recent Brexit going into the third quarter. Germany is likely to record a trade surplus of EUR 21.1 billion in May as compared with April’s trade surplus of EUR 25.7 billion.