German Industrial Production Fell by 0.2% on Pharma and Energy Slump


  • German industrial production fell by 0.2% in May.
  • Later today, ECB President Christine Lagarde and Executive Board Member Luis de Guindos will also draw interest.
  • However, the US Jobs Report will be the focal point after the ADP report impact on Thursday.

It was a relatively busy start to the day on the European economic calendar. German industrial production numbers for May drew interest this morning.

German industrial production fell by 0.2% in May versus a 0.3% increase in April. Economists forecast production to stall.

According to Destatis,

  • Within industry, the manufacture of basic pharma products and pharma preparations tumbled by 13.1%, with energy production down 7.0%.
  • However, the manufacture of motor vehicles, trailers, & semi-trailers jumped by 4.9%.
  • Production in industry excluding energy and construction rose by 0.2%.
  • Capital goods production increased by 1.3%, while the production of consumer goods declined by 1.2%.
  • There was also a 0.5% fall in the production of intermediate goods.
  • Production in industry rose by 0.7% compared with May 2022.

Today’s figures aligned more closely with survey-based data. In June, Germany’s manufacturing PMI fell from 43.2 to 40.6, raising the threat of a more extended recession. German output and new orders fell at the most marked rate in eight months. Weak demand led to manufacturers cutting production for the second consecutive month.

In contrast to the manufacturing PMI survey, German factory orders surged by 6.4% in May, suggesting a pickup in production over the near term, thus limiting the impact of today’s report on the EUR/USD and ECB monetary policy expectations.

EUR/USD Reaction to German Industrial Production

Ahead of the German industrial production numbers, the EUR/USD fell to a pre-stat low of $1.08824 before rising to a high of $1.08963.

However, in response to the industrial production numbers, the EUR/USD rose from $1.08873 to a post-stat high of $1.08873.

This morning, the EUR/USD was up 0.03% to $1.08955.

Next Up

With the German economy in the spotlight, investors should monitor ECB chatter throughout the day. ECB Executive Board Member Luis de Guindos and ECB President Christine Lagarde are on the calendar to speak today.

Eying the US economic calendar, the all-important US Jobs will be the focal point. A surge in nonfarm payrolls and hotter-than-expected wage growth would support a more hawkish post-summer Fed monetary policy outlook.

Economists forecast nonfarm payrolls to increase by 225k and average hourly earnings to rise by 4.2% year-over-year versus 4.3% in May.

US economic indicators from Thursday fueled bets on a July rate hike but had a limited impact on sentiment toward a September move. The US Jobs Report needs to align with the ADP Report and signal a pickup in wage growth to change the September narrative.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 91.1% versus 90.5% on Wednesday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 26.4%, up from 18.1% on Wednesday.

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