German Industrial Production Dips 0.4% in March to Test Recovery Hopes

On Wednesday (May 8), the German economy was in focus for the third successive day. German industrial production figures garnered investor interest.

German Industrial Production

Industrial production declined by 0.4% in March after rising by 1.7% in February. Economists expected industrial production to fall by 0.6%.

According to Destatis,

• Production in industry, excluding energy and construction, fell by 0.4% in March.
• Consumer goods production fell by 1.4%, with the production of intermediate goods declining by 0.6%.
• Outside industry, energy production tumbled 4.2%.
• However, production in construction increased by 1.0%.
• Production in industry excluding energy and construction declined by 3.4% compared with March 2023.
• While down year-on-year, industrial production was up 1.0% for January to March 2024 compared with the previous three months.

German Economy and the ECB

Despite the decline in industrial production, recent German economic indicators supported expectations of an improving macroeconomic environment. Service sector activity improved markedly in April, with trade data signaling upward trends in demand.

Nevertheless, industrial production could continue trending lower following the unexpected fall in factory orders in March.

German factory orders fell by 0.4% in March after declining by 0.8% in February. Economists forecast factory orders to increase by 0.5%. The latest industrial production figures are unlikely to affect investor expectations of a June ECB rate cut. However, investors may take comfort in the three-month-on-three-month figures.

EUR/USD Reaction to German Industrial Production

Before the German industrial production numbers, the EUR/USD rose to a high of $1.07557 before falling to a low of $1.07380.

However, in response to the stats, the EUR/USD increased from $1.07406 to a high of $1.07442.

On Wednesday (May 8), the EUR/USD was down 0.10% to $1.07432.

Next Up

On Wednesday, investors should also consider Fed speeches. FOMC members Lisa Cook, Susan Collins, and Philip Jefferson are on the calendar to speak. Following the recent US Jobs Report, views on the economic outlook, inflation, and the Fed rate path warrant investor attention.

A sticky US inflation environment continues to fuel uncertainty about a September Fed interest rate cut.

Moreover, investors should monitor ECB chatter. With the markets expecting a June ECB rate cut, views on the ECB rate path beyond June need consideration.