Jan Result +0.9% m/m (pan); +0.9% m/m (west); +0.7% m/m (east)
Forecast median: +0.1 m/m (pan)
Forecast range: -1.0% to +1.5% m/m (pan)
Dec Result +0.2% m/m (pan); +0.4% m/m (west); -3.0 m/m (east)
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FRANKFURT (MktNews) - German seasonally adjusted industrial production rose more than most analysts expected in January, though the gain was due almost entirely to a sharp 8.0% rise in output of capital goods.
The data are weaker than they at first appear. Outside manufacturing, all major production categories declined in January.
And excluding capital goods output, overall industrial production fell 0.6% m/m, according to Market News International calculations confirmed by a Federal Statistics Office official.
Output in the manufacturing sector rose 2.1% in January, due to the jump in capital goods and a smaller 0.7% rise in durable goods output. Basic goods output was down 0.8% and consumer goods output was flat.
Non-manufacturing output was clearly negative in January.
Construction production plunged 8.2% m/m in January, after rising 0.9% m/m in December.
The energy sector (utilities) dropped 2.2% in January, after dropping 3,2% m/m in December.
Mining dropped 3.3% m/m in January, after being flat in December.
The sharp rise in capital goods output follows the strong gain in manufacturing orders in December (+2.0% m/m), as companies took advantage of more generous write-off periods that expired at the end of last year.
Similarly, the 3.9% plunge in manufacturing orders in January suggests February industrial production could be very weak, all other things being equal. Key will be whether there is a pickup in consumer goods output to meet expected strong demand caused by the income tax cuts that took effect January 1.
Still, the sharp downturn in construction sector output may be exaggerated, since January this year was colder than normal. It is possible that a part of the production downturn in January will be made up in February and March if the weather allows for the original construction plans to be carried out.
Still, if the good January production outcome was mainly due to positive one-off effects from tax changes at the end of last year, hard times might be ahead.