Industry in Germany contracted in March

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Analysts had expected a decline, but only estimated it at 1.5 percent.

There was a net growth throughout the first quarter as production increased in January and February. Economists still warn of the economic downturn.

In March, developments outside the energy sector were weak. Both the production of goods in the industry and the activity in the construction sector declined significantly. The production of the energy sector, on the other hand, increased slightly. Significantly less intermediate and capital goods were produced in industry. Production of consumer goods remained slightly below the recession.

“After industrial production had developed strongly at the beginning of the year, there was an unexpectedly significant drop in March,” the Federal Ministry of Economy commented. In the first quarter, there was an increase compared to the previous quarter. “The mood in companies has improved even more recently, which points to an economic recovery later in 2023.”

The situation is evaluated somewhat differently by economists. “Production has decreased significantly,” said DIHK economist Jupp Zenzen. “The industry is likely to remain dormant for more than the anticipated recovery.” Even declining material bottlenecks and falling energy prices have not been able to compensate for the gloomy global economy and sluggish domestic demand.

Ralph Solveen, economist at Commerzbank, expects production to decline further in the coming months due to the recent weakening in demand: “There is a risk of a moderate recession in the second half of the year rather than the economic recovery that many expected.”

Carsten Brzeski, chief economist at Bank ING, even sees the risk of an earlier recession. Recently, not only figures from the industry have been disappointing, but also other economic data from, for example, retail or exports. According to previous data, the German economy had just recovered from a winter recession with a recession at the beginning of the year. “Any downward revision means that the economy has fallen into a recession nonetheless,” he warns.

(SDA)

Source :Blick