German industrial production experienced a dramatic decline in July 2024, with a 2.4 percent decrease from June and a 5.3 percent year-over-year decline. This marks a notable reversal from the 1.7 percent monthly growth seen in June. The automotive industry was the most severely affected, experiencing an 8.1 percent monthly decline following a robust performance in June at 7.9 percent, which underscores the sector's volatility. Overall industrial output was further impacted by the struggles of other critical sectors, such as fabricated metal products and electrical equipment.

Capital goods declined by 4.2 percent on the month with consumption goods declining by 1.2 percent, excluding energy and construction. Construction provided an uncommon shining light with a modest growth of 0.3 percent, despite a 1.9 percent decrease in energy production.

Energy-intensive industries experienced a milder contraction of 1.8 percent. Consequently, Germany's industrial base is significantly impacted by rising costs and sluggish demand, as evidenced by the broader decline across sectors, particularly in vital manufacturing sectors. This is underscored by the prospective challenges that may arise in maintaining growth in one of Europe's economic powerhouses, bringing down the RPI and RPI-P to minus 18 and minus 4 respectively.

Industrial production in July is expected to fall 0.2 percent on the month after a promising and stronger-than-expected 1.4 percent rise in June. The year-over-year comparison is seen decreasing 2.9 percent following 3.9 percent contraction in June.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Like the manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.