July Industrial Production Preview - 0700BST 7/9/20

Consensus: +4.7% m/m; -xx% y/y; Prev (Jun): +8.9% m/m, -11.7% y/y

• M/M industrial output increased 8.9% in Jun following May's 7.4% uptick and markets expect production to post another positive reading of 4.7% in Jul.
• Output plunged at the beginning of the crisis, falling 8.8% in Mar and 17.6% in Apr before it started recovering in May when the lockdown was eased, however Jun's report noted that output is still 12.1% lower than in Feb.
• Forward looking indicators suggest that the recovery is slowing going ahead:
• Industrial orders ticked up 2.8% m/m in Jul, however the increase was smaller than markets had anticipated.
• The truck toll mileage index continued its recovery in Jul, rising to 1.9% m/m and -2.0% y/y.
• The strong connection of the truck toll mileage index and IP makes the index an early indicator of the development in the production sector.
• Aug's Ifo business survey showed an improvement of the mfg sub-indicator with expectations leading the increase, nevertheless, many firms still consider the current business situation as poor.
• Future gains in the industrial sector depend heavily on the development of the pandemic, not only domestically but also globally as the German industrial market is heavily export oriented.
• The lingering fear of stricter social distancing measures as Covid-19 cases are ticking up again in Europe weighs on business sentiment and is likely to prevent significant increases in the months ahead.