Economy in Brief

German industrial production fell by 3.4% in March driven lower largely by a 4.4% decline in capital goods along with a 3.5% decline in the output of intermediate goods. Consumer goods output backtracked by 0.1% in March.

Sequential growth paths The sequential growth rates for output in Germany paint a mixed picture with 12-month growth at 1.6%, 6-month performance showing a decline of 0.4%, at an annual rate, and 3-month growth surging at a 9.5% annual rate, despite the sharp drop in March. The 3-month period is largely bolstered by substantial increases in January and February when output rose by 3.7% in January and 2.1% in February. As a result, the March drop is a partial backtracking from that strength.

Sector trends in German output However, the components of German industrial production do not paint a particularly strong picture with a good deal of weakness portrayed over 6 months and 12 months, largely offset by some strength over 3 months; the exception is capital goods that reverses those patterns. Capital goods output is strong over 12 months and 6 months then falls at a 4.8% annual rate over 3 months. Intermediate goods have the opposite pattern, with output falling over 6 months and 12 months then rising at a 21.2% annual rate over 3 months. Consumer goods output declines over 6 months and 12 months, then makes a marginal increase at a 1.6% annual rate over 3 months. As a result of these scattered trends, the true trend for production overall in Germany is simply too turbulent to nail down.

Construction gains momentum In the construction sector, output fell by 3.1% in March after sharp gains in February and January. Construction does show acceleration and progress with 12-month rate at -2.7%, 6-month growth at 4.3% annualized, and 3-month growth at a stunning 39.8% annual rate.

Real sales and order trends Real manufacturing orders, however, show sequential weakness with a sharp drop of 10.7 March and with 12-month growth at -11%, 6-month growth at -13.2% annualized, and 3-month growth at -22.5% annualized. Real manufacturers’ sales also are challenged. Real sales in manufacturing point lower with growth of 3.8% over 12 months, a 3.7% annual rate decline over 6 months, and a sharper 8% annual rate drop over 3 months. Real sales in manufacturing also fell in March by 2.9%.

Other industrial indicators Other industrial indicators for Germany also create a mixed picture.

ZEW: The index from ZEW remains negative and it weakened in March compared to February. Its sequential readings show deterioration. The 6-month average deteriorates from the 12-month average, but then an improvement occurs over three months compared to six months.

IFO: The IFO manufacturing index shows some tendency to increase with the 6-month and 12-month readings nearly identical and some improvement over 3 months; the monthly sequence from January to February to March, strengthens steadily. The IFO manufacturing expectations reading strengthens steadily from 12-months to 6-months to 3-months and strengthens from January to February to March. The IFO is the most upbeat reading for German manufacturing in the table.

EU Commission Indexes: The EU Commission industrial survey for Germany contrarily shows sequential weakening from 12-months to 6-months to 3-months and that signal is further reinforced by monthly sequential weakness from January to February to March.

The industrial indicators, as a group, paint a mixed picture of German manufacturing.

Other European IP reporters Other early reporters of industrial production data in Europe include France, Spain, Portugal, and Norway. France reports sequentially weakening output. Spain reports sequentially strengthening output. Portugal reports somewhat mixed trends but shows output declining on balance over all three horizons. Norway shows declines in output that worsen slightly over 6 months compared to 12 months; it still logs a gain over 3 months in the face of a small decline posted in March and no change at all in February.

Jobs in Canada rose by 41,400 in April, an acceleration from the approximately 35,000 gain made back in March. This compares to a gain of 21,800 in February and it shows acceleration in overall employment growth on that timeline. On a broader timeline that looks at average gains over 12 months, versus six-months and versus three months, we find gains accelerate over 6-months compared to 12-months, then decelerate over three-months compared to 6-months.

Looking at month-to-month changes, job growth across sectors, and major groupings, accelerates from February to March and from March to April. And although job growth overall does not accelerate on a broader timeline, job diffusion shows that the breadth of accelerations improved from 12-months to 6-months, to 3-months. That means it accelerated in an increasing proportion of categories.

Canada, much like the U.S., with an inflation problem, and a central bank that is hiking rates, has a resilient labor market.

The Canadian unemployment rate at 5% in April is unchanged for five months in a row and that unemployment rate is tied for the seventh lowest unemployment rate on data back to 1990. Canada’s unemployment rate hit is low on this timeline of 4.9% in June and July of 2022. On this timeline, the Canadian unemployment rate has been this low or lower only 1.5% of the time.

Jobs in Canada accelerate steadily only in the transportation sector looking at changes over 12-months to six-months to three-months. However, there are slowing job gains sequentially for the goods sector, in construction, and for professional and technical workers.

While job market aggregates in Canada remain strong, there clearly is also some evidence of softening as we certainly would expect given the inflation overshoot and the actions by the Bank of Canada to try to rein inflation back in.

Canada's labor force participation rate at 65.6% in April is unchanged from March and only slightly lower than it was in February 2023. The overall rate continues to cruise slightly below its pre-COVID pace when the participation rate was as high as 66.1%.