German industry: On the road to recovery until February

The "hard" economic data from German industry published in the last few days is evidence of the recovery phase until the corona eruption. According to this data, incoming orders in February were down slightly compared to the previous month. However, taken together they were much higher in the first two months of this year than in the weak final quarter of 2019. Production results were even slightly better: Output in the manufacturing sector as a whole increased markedly in January and February, with growth of just over two per cent in industry and almost five per cent in construction.

These figures show a stabilisation of the industrial economy, which came to an abrupt end in March. For the past month, both incoming orders and production statistics will be in the red. It is true that business in the industrial sector has not been reduced as dramatically as in many areas of the services sector. This is shown by the survey results, which in March fell much less sharply in the manufacturing sector than in the service sector. Nevertheless, many companies in this sector were forced to go on short-time work and shut down large parts of their production.

Against this backdrop, a very weak overall economic result can also be expected for the first quarter of the year. However, in view of the fact that the economy remained quite stable until February, the quarterly average is unlikely to have fallen as drastically as is often assumed at present. The really deep slump in German economic output will only become apparent in the results for the second quarter. How deep it will be depends above all on how long the extensive restrictions on economic activity will have to be maintained.

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