Industrial production: supply bottlenecks stall upturn

2.1 production months. The order backlog for producers of intermediates decreased to 3.6 production months. The manufacturers of capital goods needed 6.1 months to work off their order backlog. This figure has only ever been higher in the first half of this year at 6.4 production months.

According to figures from the German Federal Statistical Office, orders in hand for manufacturing after calendar and seasonal adjustment were 0.5 percent higher in June 2022 than in the previous month and 14.1 percent higher than one year ago. This is a new record high since the data series began in January 2015. While the backlog of orders from at home increased by two percent compared to the previous month, orders from abroad dropped down by a minimal 0.3 percent.

New orders, manufacturing

120 115 110 105 100 95 90 85 80

75 70 65

2018 2019 2020

2.9

-4.7

2021

Change over previous year, two-month-average, in percent (right axis) Volume index in manufacturing, two-month-average, seasonally adjusted (left axis) Change over previous quarter (q-o-q), in percent

Source: Federal Statistical Office

-5.6 -1.4

2022 75 65

55 45 35 25 15

5

-5 -15 -25 -35

Industrial production: supply bottlenecks stall upturn

Industrial production (manufacturing excluding energy and construction) decreased by one percent in July 2022 compared to the previous month following seasonal and calendar adjustment. Production was also down year on year (down 1.4 percent). Compared to February 2020, the last month before the outbreak of the pandemic, seasonal and calendar-adjusted production was down by 6.6 percent. Energy production continued climbing in July, going up by 2.8 percent. Activity in the construction sector was also up on the previous month, rising 1.4 percent. Despite these gains, the weak performance in the production sector resulted in a slim overall drop in output of 0.3 percent.

Despite the upward revision of the June figures, industrial production in the second quarter 2022 was 0.7 percent lower than in the first quarter after seasonal and calendar adjustment. This follows on from a dip of 0.2 percent in the first quarter. Year on year, production decreased by 1.1 percent. Energy production dropped by 0.3 percent quarter on quarter following seasonal and calendar adjustment. Year on year, energy production was nonetheless 0.5 percent higher. Following a strong first quarter on account of the mild weather, construction activity decreased by 3.3 percent

following seasonal and calendar adjustment. Year on year, construction activity was down by 2.8 percent in the second quarter 2022.

Among the main industrial groups, producers of intermediates recorded the biggest quarter-onquarter drop in production following seasonal and calendar adjustment, decreasing 1.4 percent. Year on year, the drop in production here was 3.4 percent. Capital goods production contracted by 0.3 percent quarter on quarter, following a drop of 1.9 percent in the first quarter of the year. Year on year, capital goods production recorded its fourth consecutive drop, this time to the scale of one percent. Consumer goods producers cut their production marginally, going down by 0.3 percent compared to the previous quarter. Year on year, production was up by 3.1 percent, its fifth consecutive rise.

The shortage of inputs is still hampering industrial production. While the ifo Institute has reported a slight easing of shortages and problems in the procurement of inputs and raw materials, the war in Ukraine has increased uncertainty and the steeply rising energy prices are also weighing on production. As of July, industrial production stagnated at the same level as in the previous quarter. The latest sentiment indicators point to receding production in the next few months. Furthermore, industrial production was also ruffled by problems in inland shipping during July and August caused by low water levels.

Produktionsentwicklung im Produzierenden Gewerbe

year on year change in percent 2020 2021 2021 2022 year Q4 Q1 Q2 original value calendar adjusted

compared to previous period in percent 2021 2022 Q4 Q1 Q2 Mai Jun Jul seasonally and calendar adjusted

Production -6.7 3.7 -1.8 -0.4 -1.4 2.1 0.4 -1.2 -0.1 0.8 -0.3

Industry -8.9 4.8 -1.4 -1.4 -1.1 2.6 -0.2 -0.7 0.5 1.4 -1.0

Intermediat goods -6.1 8.3 0.7 -0.8 -3.4 -0.4 1.1 -1.4 -0.4 0.5 -0.6

Capital goods -13.0 2.7 -4.9 -4.6 -1.0 6.3 -1.9 -0.3 2.2 2.2 -0.8

Consumer goods -3.7 2.8 3.5 5.1 3.1 0.3 1.6 -0.3 -0.9 0.7 -2.4

Energy -6.1 2.9 1.9 3.1 0.5 2.1 0.2 -0.3 -6.2 0.1 2.8

Construction industry 4.2 -1.3 -4.6 4.2 -2.8 -0.2 2.9 -3.3 -1.2 -0.9 1.4

Construction industry proper 5.4 0.9 1.6 8.8 0.3 1.2 4.0 -3.3 1.8 0.0 -1.3

Finishing industry 3.1 -3.3 -9.2 -0.6 -6.0 -1.5 1.8 -3.3 -4.2 -1.9 4.4

Sources: Federal Statistical Office, own calculations