German industry “not out of the woods” despite rise in output

German industrial output rose more than expected in October in a rare sign of strength in manufacturing, but analysts warned that supply bottlenecks for raw materials and intermediate goods would continue to hamper production in Europe’s biggest economy.

The Federal Statistics Office said industrial output was up 2.8% on the month after a revised decline of 0.5% in September. A Reuters poll had pointed to a rise of 0.8% in October.

But overall output was still 6.5% lower compared to February 2020, the month before pandemic restrictions came into effect.

“Despite the good production figures in October, German industry is not out of the woods yet,” said Commerzbank (DE:CBKG) chief economist Joerg Kraemer.

Further clouding the growth outlook for manufacturers, German industrial orders also recorded a much bigger than expected drop https://www.reuters.com/business/weaker-foreign-demand-sinks-german-industrial-orders-october-2021-12-06 in October, data showed on Monday.

Kraemer pointed out that nearly three-quarters of companies still complain about materials shortages hampering production, adding that renewed factory and port closures in China due to coronavirus infections could mean the problem would continue.

The car industry increased production by 12.6% in October, according to the statistics office, which Kraemer said had helped boost overall output.

The car industry is sitting on bulging order books and has not been able to process orders due to the acute bottlenecks.

“Despite yesterday’s slump in new orders, the orders are certainly there to strongly expand production over a longer period of time,” said the LBBW’s Jens-Oliver Niklasch.