Germany May Have Weathered Iran War Shock, but Auto-Led Recovery May Not Last, Economist Says

Germany appeared to have weathered the economic shock from the Iran war, but a recovery driven by car production may be difficult to sustain, an economist at Capital Economics said. According to Jin10, Capital Economics economist Andrew Kenningham said that after strong retail data last week, industrial data released today also improved, suggesting Germany had likely moved past the impact of the Iran war. He said industrial output rose 0.9% month on month in May, and that the combined data indicated Germany’s economy may have expanded in the second quarter. However, Kenningham said the increase in industrial output was mainly driven by higher automobile production, and he argued that momentum may not last given challenges facing the sector. He added that while Germany’s manufacturing sector appeared not to have been heavily affected by the Iran conflict, this did not change his view that, over the medium term, manufacturing’s share of the economy may gradually decline.