German Industrial Production Slides in January but May Rebound

It is a relatively quiet start to the European session. Early in the session, the German economy was in the spotlight, with German industrial production in focus.

Industrial production fell by 3.1% in December, reversing a 0.4% increase in November. Economists forecast a 0.7% decline.

According to Destatis,

• Production in industry excluding energy and construction fell by 2.1% compared with November 2022.
• Within industry, the production of consumer goods increased by 0.3%, while the production of capital goods remained unchanged.
• However, the production of intermediate goods slid by 5.8%.
• Outside industry, energy production fell by 2.3%, with production in construction sliding by 8.0%.
• Production in energy-intensive industrial branches declined by 6.1%, with a downward trend seen throughout 2022.

While the numbers were weak, factory order numbers for December impressed on Monday, suggesting a sharp increase in production in the coming months.

However, Germany’s manufacturing PMI also painted a gloomy picture, despite improved optimism. According to the January survey, new orders continued to fall at a marked pace.

Despite the weak production numbers, the shift in sentiment toward the economic outlook will likely limit the impact of the numbers on the ECB monetary policy outlook.

EUR/USD Response to German Industrial Production

Ahead of today’s industrial production numbers, the EUR/USD fell to a low of $1.07240 before rising to a high of $1.07438.

In response to the production figures, the EUR/USD rose to a post-stat high of $1.07398 before falling to a low of $1.07340.

At the time of writing, the EUR was up 0.11% to $1.07369.

Up Next

Trade data from France and industrial production figures for Spain are also due out. However, the numbers are unlikely to impact the ECB’s policy goals.

Investors do need to consider ECB member speeches. ECB Board Member Isabel Schnabel will speak later today. Schnabel will need to deviate from the current ECB script to move the dial.

The ECB will release the Consumer Expectations Survey, which will draw interest.

It is a quiet US economic calendar. US trade data for December will draw interest early in the US session. However, there would need to be a marked widening in the US trade deficit to spook investors. With US stats on the lighter side, post-US Jobs Report FOMC member commentary will need consideration.

Fed Chair Powell will draw plenty of interest. A shift in forward guidance in response to the US Jobs Report would test the appetite for riskier assets.