Industry surprisingly picks up speed again in September

German companies surprisingly increased their production in September. Industry, construction and energy suppliers together produced 0.7 percent more than in the previous month, as the Federal Statistical Office (Destatis) announced on Friday. Economists polled by the Reuters news agency had expected stagnation, after an increase of 1.0 percent in August.

In a less volatile three-month comparison, production in the third quarter was 0.4 percent lower than in the previous quarter.

The positive development in September is largely due to the growth in the automotive industry: production here increased by 17.1 percent compared to the previous month. However, the high value is somewhat misleading: "In this area, production in the previous two months was at a low level due, among other things, to production changes and factory holidays," explained the Destatis spokesman.

Experts remain cautious

The increase in the pharmaceutical industry, where production rose by 8.0 percent after two weaker months, also had a positive impact on the overall result. However, the decline in construction production (-2.6 percent) had a negative impact. Mechanical engineering also fell (-6.5 percent).

Industrial production (manufacturing industry excluding energy and construction) rose by 1.7 percent in September compared to the previous month. The production of capital goods increased by 3.0 percent, the production of consumer goods increased by 0.8 percent and the production of intermediate goods increased by 0.1 percent. Outside industry, energy production fell by 1.2 percent.

“The increase in industrial production published today shows that the recovery of German industry and thus the German economy is intact,” says Sebastian Dullien from IMK, analyzing the numbers. Although the increase has to be interpreted together with a downward revision of the data from the previous month, there are pleasant surprises in the details.

However, Dirk Schumacher, chief economist at KfW, believes that great optimism is premature: "The production figures are very volatile - this makes it difficult to identify the underlying trend in real time." The September figures indicated a stabilization of production in the industry and the figures for incoming orders and the sentiment indicators suggested that the momentum would improve in the next few months. “Of course, there is still a long list of risk factors that could end the industry’s upswing before it really gets going.”

According to Jörg Krämer, chief economist at Commerzbank, industrial production continues to move sideways at a low level. The increase in the Ifo business climate suggests that production could increase somewhat in the coming months. "But such a recovery is likely to be moderate because of the China shock, Trump's tariffs and the reform standstill."