German Industrial Output Declines for 7th Straight Month Amid Economic Risks

Summary

  • German industrial output faced its seventh consecutive monthly decline in December.
  • This downturn is largely due to high energy costs and weak domestic and external demand.
  • The lack of orders in manufacturing is increasingly affecting the German economy.
  • In contrast, Germany saw an unexpected surge in industrial orders in December, with the highest monthly increase in over three years.
  • . Nonetheless, economists caution a possible recession due to the ongoing industrial decline.

Continued Decline in German Industrial Output

December marked the seventh consecutive downward trend in German industrial output. This persistent decline emphasizes industry’s ongoing negative impact on the country’s growth, according to Capital Economics’ senior Europe economist, Franziska Palmas.

“The German industrial sector may continue to experience falling output into 2024, primarily due to high energy costs and feeble domestic and external demand,” stated Palmas.

Individual Sector Performance

Specific industries saw significant drops in production, with the energy-intensive industries experiencing a 5.8% decrease in December. The chemical industry, a key sector, saw a substantial reduction of 7.6% during the same period, and the construction industry suffered a 3.4% decrease. While many other sectors also saw a decline in production, these were less severe said, the statistics bureau.

Conversely, an increase in production in the automotive industry by 4.0% has had a positive impact on the overall performance.

Economic Outlook

ING’s global head of macro, Carsten Brzeski, remarked, “The substantial decrease in both exports and imports, coupled with today’s industrial reports, not only showcases the weakness of the German economy but also heightens the risk of a downward revision of the fourth-quarter GDP growth.”

Economic predictions indicate a 0.3% drop in Gross Domestic Product for the final quarter, causing economists to foresee another approaching recession.

Industrial Production and Economic Impact

As per the report, industrial production in the last quarter decreased by 1.8% when compared to the previous quarter. In November, there was a 0.2% decrease in production compared with October. Overall, after calendar adjustment, the entire production of 2023 was 1.5% lower than the previous year.

Unexpected Jump in Industrial Orders

On a brighter note, German industrial orders saw an unanticipated rise by 8.9% in December, recording the highest month-on-month increase in over three years. This was largely due to an exceptional number of aircraft orders, according to federal statistics on Tuesday.

Despite the significant increase, the Ifo Institute explained that the dearth of orders in manufacturing continues to pressure the German economy, warning that Tuesday’s data might not alter this scenario.

PIP Penguin
Logo