German industrial production defied expectations of a -0.5% contraction, with the latest report indicating 0.5% growth instead. The report has wider implications for the Eurozone economy.
Key Takeaways
- German industrial production output was measured at 0.5% growth, 1% higher than the market consensus predictions.
- February had registered growth of 0.7% prior to this, although the sector has been struggling on a macroeconomic scale.
- The March reading is down -0.9% compared to March of last year.
Production in industry, excluding the volatile components of construction and energy, rose 0.4% in March according to the report released by the German office of statistics on Wednesday. Consumer goods rose 1.1%, and construction rose 1%. A previous report on Tuesday showed that new factory orders came in lower than expected with 0.6% growth in March, pointing to reduced domestic demand.
Germany’s €1.6 trillion export industry has been negatively impacted by the general economic slowdown taking place in the Eurozone and throughout the global economy. Trade protectionism and uncertainty surrounding Brexit continue to cloud economic forecasts.
In April, Germany halved its growth forecast to just 0.5% for the year, pointing to ongoing difficulties the EU’s economic powerhouse is facing. However, Wednesday’s industrial production report eases fears of a contraction that could have placed selling pressure on the Euro.
Expert Outlook
"German industry is currently better than it's perceived to be" with four consecutive months of growth in a row, said economist Carsten Brzeski of ING bank.
Lower orders could mean a trough is still ahead for output, The reduction in domestic demand reflected in low new orders could signal an impending contraction, but Brzeski stated that Q1 GDOP growth “might actually surprise to the upside.”
“It looks as if Germany could return as the best student in class" in the eurozone, Brzeski added.
Market Reaction
Gold is trading at $1,291.23/oz at the moment, up 0.60% on the day. At the current trajectory, gold is poised to test crucial resistance at $1,290.00/oz, buoyed by weakness in the equity markets. Some analysts view the rally as temporary.
"So far Trump's tariff threat has had much bigger impact on the stock markets than precious metals. While gold is drawing support from the scenario, investors are not accumulating the metal," said Carlo Alberto De Casa, chief analyst with ActivTrades.
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