German factory output up as economy defies Hormuz fears

The automotive industry led the way with production volumes up 3.6%. (EPA Images pic)

FRANKFURT: German industrial production ticked up more than expected in May, official data showed Tuesday, as Europe’s top economy defied the worst following the virtual closure of the Strait of Hormuz.

Factory production rose 0.9% on the month, statistics office Destatis said, beating expectations in a FactSet poll of analysts who had expected a rise of 0.3%.

The automotive industry led the way with production volumes up 3.6%, Destatis said, while production of industrial machinery also rose 1.3%.

“Despite the war in the Middle East and soaring energy prices, industrial production is proving resilient,” ING analyst Carsten Brzeski said.

“Some industries or companies actually seem to have benefited from the war in the Middle East, as Asian competitors were hit harder by the closure of the Strait of Hormuz.”

The Strait of Hormuz was at the centre of tensions during the Middle East war, when Iran blockaded the waterway and a number of commercial vessels came under attack, sending global energy prices sharply higher.

The United States responded with its own naval blockade and later launched retaliatory strikes against Iran after accusing Tehran of targeting commercial shipping.

Maritime traffic resumed after Washington and Tehran signed a memorandum of understanding last month aimed at ending the conflict and reopening the strategic route.

A less volatile comparison by Destatis over the past three months showed production rising just 0.1%, and production in May was flat versus the same month last year.

Germany’s economy has barely grown since a burst of pent-up pandemic demand at the end of 2022, hit by high energy prices and increasingly fierce Chinese competition in key export markets.

Overall production volumes in May were eight percent below the monthly average for 2021, according to Destatis data.