German industrial production unexpectedly sparks in May

(Sharecast News) - German industrial production sparked in May, official data showed on Tuesday, surpassing expectations. According to provisional figures from Destatis, the Federal Statistical Office, price-adjusted production rose 0.9%, comfortably up on both consensus, for 0.2%, and the previous month's revised 0.2% uplift. Year-on-year, industry production was unchanged.

Driving the growth was the motor industry, which saw production accelerate 3.6%. Construction was also stronger, ahead 0.9%. That helped offset a 0.4% dip in the production of intermediate goods.

The outbreak of war in the Middle East hit economies worldwide as oil and gas prices soared, consumer sentiment plunged and supply chains were strained. Germany, the Eurozone's biggest economy, is heavily reliant on manufacturing, leaving it particularly vulnerable to any unexpected spikes in raw material and energy costs.

Yet Carsten Brzeski, global head of macro at ING, said German industrial production was proving resilient despite the US-Iran war.

"Looking ahead, the opening of the Strait of Hormuz, as well as easing geopolitical tensions - or simply the fact that everyone has started to accept that geopolitical tensions are part of the new normal - should bring a boost to the Germany economy," he said. "However, it won't be a huge boost but rather a mild tailwind. Despite some improvement, production expectations in industry remain weak, and order books are only very gradually filling up again."