In April, German industrial production dropped more than twice the pace expected. Industrial production fell by 2.2% M/M, while a decline by 1.0% M/M was expected. Also the previous figure was downwardly revised, from 2.8% M/M to 2.2% M/M. The annual rate of production is now down by 0.7% Y/Y, the biggest year-on-year decline since early 2010. The breakdown shows that weakness was broad-based as mining and manufacturing activity fell by 2.4% M/M due to weakness in both durable (-1.6% M/M) and non-durable (-4.1% M/M) consumer goods, capital goods (-3.6% M/M) and intermediate goods (-0.4% M/M). Construction activity fell back by 6.0% M/M in April after a 26.0% M/M surge in March. Weakness was however partly compensation by a pickup in energy production (by 2.4% M/M).
The sharp decline completely reverses the strong March performance, and is a poor start to the second quarter, confirming the weakness seen in the confidence indicators. It is now almost certain that the strong performance of the first quarter, which kept the euro area out of recession, will not be repeated in the second quarter.