German industrial production falls, recession worries rise

Industrial production in Germany fell 3.4 percent in March, more than expected due to a sharp drop in auto manufacturing, accelerating recession concerns in Europe’s largest economy.

The German Federal Statistical Office (Destatis) has announced provisional data on industrial production for March.

Consequently, seasonally adjusted and calendar industrial production decreased by 3.4 percent in March compared to the previous month. The expectations for industrial production in the markets were for a decrease of 1.3 percent.

The decline in industrial production in March came after factory orders announced last week fell 10.7%, the biggest monthly drop since April 2020, when the covid-19 epidemic peaked, compared to to the expectation of a decrease of 2.2% in March, driven by the global weakening. economy.

As hopes rise that the German economy can survive a recession, the latest negative data has fueled recession concerns in Europe’s largest economy.

Industrial production data for February, which was announced as a 2 percent monthly increase, was also revised as a 2.1 percent increase.

The data revealed that industrial production, excluding energy and construction, fell 3.3 percent in March compared with February.

THE PRODUCTION OF INTERMEDIATE GOODS DECREASED 4.4 PERCENT

In said period, the production of intermediate goods decreased by 4.4 percent and the production of consumer goods decreased by 0.1 percent. Apart from industry, an increase of 0.8 percent was observed in energy production, while construction registered a decrease of 4.6 percent.

It should be noted that there was a sharp decrease of 6.5 percent in the production of the automotive industry, which is expressed as the cornerstone of the German industry with its brands such as Volkswagen, BMW and Mercedes.

“The auto industry has had a particularly large impact on the fall in industrial production in March,” Destatis said in a statement. It was said. In March, mechanical engineers produced 3.4 percent less.

In the Destatis statement, it was indicated that production in energy-intensive industries decreased 3.3 percent in March compared to February, and the country’s industrial production increased 2.5 percent compared to the previous quarter due to the strong January and February growth. in the first trimester.

In the statement issued by the German Ministry of Economy and Energy, it was indicated that after the production in the German industry increased strongly at the beginning of the year, there was an unexpected sharp decrease in March, “In the first quarter, there was a 1.8 percent increase compared to the previous quarter. Optimism in companies has increased even more recently. This sheds light on an economic recovery in the coming months of the year.” It was said.

THE RISK OF RESSION CONTINUES

ING Germany chief economist Carsten Brzeski, in his assessment on the matter, claimed that industrial production data for March showed that a “renaissance” in the industry is far from reality, saying: “The possibility of a revision to the downside in Q1 GDP growth remains high Industry data shows Germany has officially entered a technical recession,” he used his remarks.

Brzeski stressed that “industrial production data is not the only disappointment” regarding the German economy in March, saying: “In fact, all macro data for the German economy fell in March.” Sharp declines in retail sales and exports, coupled with today’s industrial production data, raised the chances of a downward revision in first-quarter GDP growth. A downward revision would mean that the economy would eventually slip into recession.” he made his assessment.

Elmar Völker, economist at German bank Landesbank Baden-Württemberg (LBBW), said: “Another bad news from German industry. The figures underline that the danger of recession in the economy has by no means been avoided.” saying.

Hauck Aufhauser Lampe Privatbank Chief Economist Alexander Krüger noted that the general increase in interest rates after high inflation may slow down companies’ investment plans.

Destatis will release its final first quarter GDP data on May 25.

‘WITH HIS’ STOP IN THE FIRST QUARTER

Meanwhile, the German economy was unable to grow in the first quarter of this year as unusually high inflation and rising interest rates suppressed consumer spending.

Thus, after zero growth in the first quarter, the German economy did not enter “closely” into technical recession, which is expressed as “two quarters of GDP contraction”. The German economy contracted 0.5 percent in the last quarter of last year.

Although the bottlenecks that arose during the Covid-19 epidemic have eased, the German economy is negatively affected by stagnant demand as a result of rising interest rates, declining confidence in the economy and the decrease in consumer purchasing power. in an environment of unusually high inflation.

The German government expects 0.4 percent growth in the economy this year. Leading German economic institutes predict the country’s economy will grow 0.3 percent this year. (AA)