German industry reduced its production significantly in March. Compared to the previous month, the total production fell by 3.4 percent, as the Federal Statistical Office announced on Monday in Wiesbaden. Analysts had expected a setback, but estimated it at only 1.5 percent. Because production increased in January and February, there was clear growth for the entire first quarter. Economists are nevertheless warning of an economic downturn.
In March, developments were weak except for the energy sector. Both the production of goods in industry and activity in the construction industry fell significantly. In contrast, emissions from the energy sector rose slightly. Significantly fewer intermediate and capital goods were produced within industry. Consumer goods production was slightly below stagnation.
unexpectedly significant decline
“After production in industry developed vigorously at the beginning of the year, there was an unexpectedly significant decline in March,” commented the Federal Ministry of Economics. In the first quarter, however, there was an increase compared to the previous quarter. “The mood in companies has recently improved further, which speaks for an economic recovery in the further course of 2023.”
The situation is assessed somewhat differently by economists. “Production has received a significant damper,” said DIHK economic expert Jupp Zenzen. “The industry is more likely to stand still than the hoped-for recovery.” Even decreasing material bottlenecks and falling energy prices could not compensate for the gloomy global economy and sluggish domestic demand.
Economic expert Ralph Solveen from Commerzbank expects a further decline in production in the coming months due to the recent weakening of demand: “Instead of the economic recovery that many had expected, there is a risk of a mild recession in the second half of the year.”
Carsten Brzeski, chief economist at Bank ING, even sees the risk of an earlier recession. Not only figures from industry have recently been disappointing, but also other economic data, for example from retail or export. According to previous data, the German economy just avoided a winter recession with stagnation at the beginning of the year. “Any downward revision would mean that the economy has fallen into a recession after all,” he warns.
