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Economy: German industrial production falls unexpectedly

Economy: German industrial production falls unexpectedly
Economy: German industrial production falls unexpectedly

Manufacturing shrank significantly in May. It is the largest decline since the end of 2022. Economists see this as a bad omen for the German economy.

German industrial production is declining sharply. In May, total production fell by 2.5 percent compared to the previous month, as the Federal Statistical Office in Wiesbaden announced. It is the most significant setback since the end of 2022. Analysts had expected a slight increase of 0.1 percent on average. Compared to the same month last year, production fell by 6.7 percent.

“The significant drop in industrial production makes it clear once again that a rapid and significant economic recovery is nowhere in sight,” said Commerzbank chief economist Jörg Krämer. After a stagnation in economic output in the second quarter, only an anemic upward movement is to be expected.

The weak production data follows disappointing order figures from the previous day. According to them, industrial orders fell in May for the fifth time in a row. The monthly decline was 1.6 percent. Year-on-year, orders were 8.6 percent lower.

Economists alarmed by decline

“More bad news from industry,” said economist Jens-Oliver Niklasch of Landesbank Baden-Württemberg, commenting on the new data. “It seems as if a turnaround for the better is further away than ever.” The German economy is experiencing stagnation for the second year in a row.

There have recently been some bright spots: business sentiment has tended to improve, and several economic institutes have raised their growth expectations – albeit from a low level. But all of this could soon be in jeopardy again: “The German economy is losing momentum again,” explained chief economist Carsten Brzeski of the ING bank.

In a commentary, the Federal Ministry of Economics spoke soberly of an initially subdued industrial economy. “Production is only likely to stabilize as world trade continues to recover and demand for industrial products gradually picks up.”

In detail, only the energy sector was able to impress in May. It increased its output by 2.6 percent compared to the previous month. In contrast, goods production in industry fell by 2.9 percent. Activity in construction was also significantly weaker, with a decline of 3.3 percent.

Source: Stern

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