The German industrial production reflects the industrial performance of the German economy. It measures the per volume change in output from mining, quarrying, manufacturing, energy and construction sectors in Germany. Germany being the second largest industrial products exporter plays a major role in the direction of the European economic trends.

How important is it?

Giving the production volumes of the world’s second largest exporter, this indicator is very important to traders in the European zone as it greatly shapes the trend of Europe’s economic growth. The performance of the German economy can be very much influenced by this indicator even though it is only a preliminary figure that gives an insight into projected monthly activity by percentages.

How is it computed?

The German federal statistics office collects information on the month’s production from the mining, quarrying, manufacturing, energy, and construction sectors. Upon compiling all the statistics fro these sectors the results are then contrasted against the previous month’s production levels to determine the increase or decrease in production. The figure is then tuned in to a percentile rate.

How does it affect forex rates?

Giving the rate of production in the industrial sectors, this index affects the forex rates by the fact that a high industrial production rate signifies a possible increase in export trade. Export trade gives the country most of the needed forex reserves making the German currency stronger on the international market. Good trade balance is very much determined by the country’s performance in export versus import activity. If the country’s export trade falls far below expected rates and over a long time, the result may be an eminent economic recession. If nobody demands for the local products then the companies may have no choice but to reduce the production levels to try and reduce the material costs. This scenario is very unhealthy for the forex trade since the demand for the local currency is likely to decline n the backdrop of low production. In a worst case scenario the government may be forced to take some measures to try and revamp the economy such as shifting of the interest rates in line with the prevailing circumstances.

How does it affect the stock markets?

A decline or increase in the industrial production of any nature can not be treated as a light matter by any stock market player. This is because any indication of production decline or increase means either a loss or gain for any stock holder in the respective share holdings. It is therefore automatic hat news o any impending changes in the production levels will affect the investor’s attitude leading to great shifts in the sock market as every share holder tries to take necessary action to cushion their investment against any losses. All investors both local and international must therefore keep a close watch in the production projections in order to make time conscious decisions for the sake of strategic investments. If there is an anticipated increase in production most investors will try to purchase shares leading to increases in stock prices and vice versa.