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German industrial production drops more than expected

German industrial production fell more than expected in April as signs emerged that supply constraints were holding back output.
Factory, energy and construction production dropped 1% from a month earlier, below analysts’ average forecast of a 0.4% dip. Production rose 26.4% from a year earlier, also below the consensus which was for 29.5% growth.

Total production was hit by a 3.3% monthly drop in output of consumer goods, while capital and intermediate goods dipped 0.1% and 0.2% respectively. Energy production rose 6% because of unusually cold weather and construction fell 4.3%.

Core manufacturing production was 6.4% below its pre-pandemic level in Europe’s manufacturing power house and the shortfall in total output was 5.6%. Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, noted that new orders were about 10% higher than their pre-virus level at the start of the first quarter.

“In other words, we now see clear evidence in the official numbers that supply-side constraints are holding back output,” Vistesen said. Manufacturers have been hit by shortages of raw materials as economies have revived but supply chains have been under pressure.

Vistesen said if production does not pick up in May and June output would dip 0.2% from the previous quarter in the three months to the end of June.

“We are confident that the final headline will look a bit better than that, probably by 0.5-to-1%,” Vistesen said.

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