Goods production was surprisingly weak in October. A 1.4 percent monthly decline was the sharpest contraction since December 2016 and although September's drop was reduced to 0.9 percent, output has now fallen in four of the last five months. Annual growth was 2.7 percent, down from 4.2 percent last time and its slowest pace since June.
In fact, the headline data would have looked even worse but for energy where production expanded fully 5.1 percent versus September. Manufacturing output shrank 2.0 percent led by hefty decreases in capital goods (2.7 percent) and consumer goods (2.6 percent). Intermediates (minus 1.0 percent) fared little better and rounding off a very poor month, there was also a sizeable decline in construction (1.3 percent).
October's miserable showing puts industrial production some 1.2 percent below its average level in the third quarter when it rose 1.1 percent versus April-June. On the same basis, manufacturing was down 1.8 percent following a 1.8 percent quarterly gain. Such figures are in complete contract with the decidedly upbeat pictures painted by recent PMI and Ifo surveys and, indeed, by the ongoing solid uptrend in manufacturing orders. As such, there should be a major bounce in output in November/December and/or some sizeable positive revisions in the pipeline. If not, fourth quarter GDP growth is going to surprise significantly on the downside.