EU Economy
Germany: Industrial production almost returning to pre-crisis level
By Finfacts Team
Jan 12, 2011 - 3:17 AM

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Germany’s manufacturing industry has recovered from the economic nosedive of autumn 2008 more quickly than originally expected according to Deutsche Bank Research. By the time the recession bottomed out in April 2009 production had been cut back by 24% in all. Three-quarters of this decline has been recouped in the meantime.

Last week Germany's economics ministry reported that industrial orders jumped by more than 5% in November compared with the previous month. Total orders are up 22% on November 2009 and last November's 5.2% rise followed a 1.6% increase in October. Orders from countries outside the Eurozone were up almost 15% in November, reflecting the strong position Germany has in emerging markets. Meanwhile, on Tuesday, German industrial giant Siemens said it is has made a good start to its new fiscal year amid "a very strong increase in new orders."

Europe's biggest industrial group said that it expects revenue and profit for its fiscal first quarter - - the October-December period - - to be higher than a year earlier. Siemens said revenue for the period is "expected to considerably exceed" the prior-year level of €17.4bn, and income is expected to be above the previous year's €1.5bn.

According to a statement from the group, CFO Joe Kaeser told investors in New York that the company is "off to a good start" to its 2011 fiscal year.

DBR economist, Philipp Ehmer, said the industrial production trend is most visible in the cyclically driven capital goods sector: output had fallen by over 30% in segments such as chemicals, metals and electrical engineering - -  and by no less than 44% in the car industry.

Carmakers received a very substantial boost from government stimulus packages, though, and of course from the scrappage bonus in particular. As a result, the car industry has now made up nearly 90% of the ground lost during the recession-induced slump. Along with the chemicals and plastics industries, which mainly produce inputs for other sectors, it is one of the sectors that have recovered most.

By contrast, the mechanical engineering industry is considered a cyclical laggard that reacts only slowly to changes along the curve. It starts to benefit once industry resumes investment in new production capacities. This is why mechanical engineering output has so far only rebounded by slightly more than 50% according to the economist. However, incoming order volumes indicate above-average growth for 2011.

Ehmer said German industry is unlikely to be able to maintain the rapid pace of recovery in 2011. The upswing is losing some momentum. Nevertheless, the manufacturing sector has the potential to match the pre-crisis level by spring 2012. This would mean that German industry might have digested the worst recession since World War II in the space of not more than four years. A few capital goods segments - - carmakers, plastics and chemicals - - are likely to complete their recovery even before the end of 2011.


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