Industry above expectations in August due to the impact of the holidays, stagnated during the summer
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Industrial production rose by 1.5% year-on-year in August, while the analysts' consensus, according to Reuters, had expected a 1% year-on-year decline (see Chart 1). The 1.9% year-on-year decline in July was thus replaced by stronger-than-expected growth, but this was mainly due to the different distribution of full-time holidays between the summer months compared with last year. The summer months tend to be more volatile due to this effect and the figures should therefore be taken with a pinch of salt. On average for July and August, the industry declined by 0.2%, while for the whole of this year it is down by 1.3%.
The noticeable drop in the domestic industry in July was mainly due to the impact of full-holidays in the automotive sector. The year-on-year fall in July was a strong 16%, while in August it rose by 14.4% (Chart 2). The volatility of car production was thus the main factor behind the decline and subsequent rise in industrial production during the summer months, with a contribution of -2.8 and 2.5 p.p. to year-on-year growth. For the whole of this year, car production is down by 1.6% while it was up by 17% last year.
Although the effect of the holidays is difficult to adjust for, the average development of the industry during the summer months was slightly more favourable compared to the development in Q2, but leading indicators remain pessimistic in this respect and do not suggest a faster turnaround (Chart 3). In particular, developments in Germany are negative for domestic industry, which is not just a recent development but a longer-term trend, with the decline in industrial production in Germany over the past 10 years among the highest in the EU (Chart 4).
For the whole of this year, from January to August, the industry is down by an average of 1.3% year-on-year (Chart 5) and is thus likely to experience a similar decline for the whole of this year as last year.
