German October Industrial Production data missed expectations at -0.4% M/M (seasonally adjusted, +0.2% consensus, -1.3% prior, revised from -1.4%) and -3.5% Y/Y (working day adjusted, -3.0% cons, -3.6% prior, revised from -3.7%).

• This was the fifth monthly decline in a row, though the less volatile 3M/3M measure ticked up slightly to -1.9% from -2.0% in September.
• The decline was broad-based but particularly driven by a soft month in the equipment manufacturing sector (-6.3% M/M vs +3.9% prior), matching developments from October factory orders. Automobile production recovered slightly after last month’s decline (+0.7% M/M vs -5.0% M/M).
• Excluding the energy and construction sectors, the report paints a weak, but slightly stronger picture versus September on all of a monthly, yearly, and three-monthly comparison (-0.5% M/M, -3.2% Y/Y and -1.9% 3M/3M vs -1.7%, -3.5% and -2.1% respectively).
• The energy-intensive sector continues to suffer, production declined a further -1.4% M/M in October (vs -1.1% prior). The recently announced energy tax relief might provide some slight support for the industry starting in January but is not expected to provide a major shift in German industrial competitiveness.
• This industrial production report is consistent with recent data releases (October factory orders / November manufacturing PMI / October trade balance) which have suggested that the economic decline in Germany is flattening out slightly.
• After Wednesday's substantial factory orders data miss (which as MNI noted actually saw a decent "core" reading), an IP miss vs the consensus coming into the week may have been partially priced in. However, the IP release provided a slight bid to Bund futures, which ticked up over 15 ticks to around 135.1.

Destatis, MNI