German industrial production showed an impressive rebound in March. Industrial production rebounded by 2.8% M/M, while a more moderate increase was expected (0.8% M/M). Also the previous figure was upwardly revised, from - 1.3% M/M to -0.3% M/M. The break-down shows that part of the gain was due to an impressive rebound in construction. After falling by 16.9% M/M in February, construction rebounded by 30.7% M/M in March. But strength was not only based in construction as manufacturing activity rose by 1.5% M/M, the third consecutive increase.
Within the manufacturing sector, strength was broad-based and led by non-durable consumer goods (3.4% M/M) and capital goods (2.0% M/M). Energy production fell by 1.8% M/M after increasing by 9.6% M/M in February. We are surprised by the resilience of the German manufacturing sector as the PMI’s show a quite different, more downbeat picture. A further worsening is however not excluded due to the weakness in other EMU countries. Nevertheless, strong March figure and upward revision of the February outcome boost expectations for German Q1 GDP.