In February, Germany's industrial output contracted by 1.3 percent from the previous month and fell 4.0 percent year-over-year, highlighting persistent weaknesses in key sectors. While the broader three-month trend showed a slight 0.1 percent increase, this did not mask sector-specific downturns. The construction industry led the decline with a 3.2 percent drop, followed by steep falls in food production (minus 5.3 percent) and energy output (minus 3.3 percent), reflecting a combination of seasonal factors and structural pressures.

Despite this, there were glimmers of resilienceparticularly a 3.3 percent rise in electrical equipment manufacturing and a 0.2 percent increase in capital goods production, suggesting ongoing investment in high-tech and industrial infrastructure. However, these gains were offset by declines in consumer goods (minus 3.0 percent) and intermediate goods (minus 0.4 percent), indicating fragile domestic demand.

Energy-intensive industries remain under pressure, falling 0.6 percent month-over-month and 4.0 percent year-over-year, as high energy costs and global uncertainty continue to constrain production. While January's gains (2.0 percent) provided a brief uplift, February's performance signals a cautious outlook for industrial recovery in early 2025. This latest update takes the German RPI to minus 21 and the RPI-P to minus 17. This means that economic activities remain well behind the expectations of the German economy.

After a 2.0 percent month on month rebound in January, forecasters expect output to fall back by 1.0 percent in February from January, with a decline of 3.7 percent from a year ago.

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.