Industrial Production (Jun 2020) Preview

Consensus: +8.1% m/m; -11.0% y/y; Prev (May): +7.8% m/m, -19.3% y/y

• IP is forecast to rise by 8.1% m/m in Jun after May's 7.8% bounce, while y/y production is still seen negative at -11.0% after recording a 19.3% fall in May.
• May's survey noted that output is still 19% below Feb's pre-crisis level with auto production 50% below the level recorded in Feb.
• Forward looking indicators suggest further gains in coming months with factory orders rising sharply in Jun by 27.9%, beating market forecasts looking for an uptick to around10%
• The truck toll mileage index, which is closely correlated with production, edged up again in Jun by 4.7% m/m, however, the y/y index still fell by 3.8%, although at a slower pace.
• The mfg sub indicator of the Ifo business survey showed an increase in Jul, while the mfg PMI ticked up as well.
• The VDA reported that auto production doubled in Jun compared to May but remains 20% below pre-crisis level.
• According to the Ifo institute, the amount of people enrolled in short-term working in the industrial sector is gradually declining, recording 30% in Jul after 33% in Jun.
• However, the German industrial sector is heavily depended on external demand, which currently remains weak as Covid-19 cases are still rising in several countries, likely resulting in a slow recovery back to pre-covid levels.