German industrial production at its lowest since 2015

Germany’s industrial production declined at the fastest pace in two-and-a-half years in February largely on weak construction activity.

Industrial output dropped 1.6% month-on-month in February, in contrast to a revised 0.1% rise seen in January, industrial production data from Destatis showed Friday. Output was expected to climb 0.3%.

This was the biggest decline since August 2015, when output fell 1.7%.

On a yearly basis, industrial production grew at a slower pace of 2.6% in February after rising 6.3% in January. Economists had forecast 4.4% expansion for February.

Production in industry excluding energy and construction decreased 2.0%.

Within industry, energy production grew 4%, while construction dropped 2.2%. The production of capital goods slid 3.1% and that of consumer goods by 1.5%. Similarly, intermediate goods output showed a 0.7% fall.

Order book situation and the positive mood among companies suggest that the industrial economy will continue to move upwards, the economy ministry said. However, growth momentum is likely to be weaker than in the previous year.

Ralph Solveen, an analyst at Commerzbank, said he expects a lower dynamic in the coming quarters as well. However, this is hardly the end of the upswing.

The European Central Bank’s expansionary monetary policy continues to stimulate the economy, Solveen added.

Elsewhere, the Purchasing Managers’ survey for construction showed that the sector contracted for the first time in more than three years in March due to colder-than-usual weather.

The IHS Markit construction PMI fell to 47.0 in March from 52.7 in February. The contraction was followed by particularly strong growth in January, when the PMI had hit an 82-month high.

Nonetheless, constructors remained highly confident about the outlook for activity over the next 12 months, citing a strong pipeline of new orders.