For the third month in a row, German industry has recovered from the slump in production caused by the coronavirus crisis. However, the increase in July was significantly weaker than expected. Production in the manufacturing sector increased by 1.2 percent month-on-month, the Federal Statistical Office announced in Wiesbaden on Monday.

Analysts had expected stronger growth of 4.5 percent. However, after the historic economic slump in the second quarter, economists continue to expect a strong recovery in the third quarter. A survey of German industrial companies by the Ifo Institute also points to a further increase in production.

However, the increase in June was stronger than previously reported. The Federal Office revised the month-on-month increase upwards to 9.3%, after an increase of only 8.9% had previously been reported. Production had fallen significantly in March and April due to restrictions in the fight against the coronavirus pandemic. Since then, some of the slump has been made up for.

A year-on-year comparison shows that the crisis is still weighing heavily. Compared to the same month last year, total production fell by 10.0% in July. The pre-crisis level is still clearly undercut: compared to February, the month before the start of the restrictions, total production is 10.8% lower.

In the largest manufacturing sector, the automotive industry, production rose by 6.9% in July compared to the previous month. However, according to the Federal Office, it is still a good 15 percent below the February figure.

An indicator for production expectations calculated by the Munich-based Ifo Institute rose to 15.4 points in August, up from 14.3 points in the previous month. "Little by little, the engine of the German economy, industry, is getting going again," commented Klaus Wohlrabe, head of the Ifo survey.

The Federal Ministry of Economics also assumes "that the catch-up process will continue in the coming months". This is supported by the improved mood in companies and the reduction in short-time working. However, the ministry's experts also expect the recovery in industry to take some time yet.

The production data from July is "quite a disappointment", commented economist Jens-Oliver Niklasch from Landesbank Baden-Württemberg. "The recovery in industry is faltering," said chief economist Thomas Gitzel from VP Bank. Nevertheless, the data from the German automotive industry was "pleasing".

The economist continues to expect "strong growth" in the economy as a whole in the third quarter. Consumers and consumers are still unsettled, which is weighing on consumption and investment. In contrast, the strong economic recovery in China, an important trading partner, is providing a glimmer of hope. "German companies can at least rely on orders from Asia," said Gitzel.