Industrial production falls unexpectedly sharply
German companies have reduced their production for the fourth month in a row - and surprisingly sharply at that. Economists see this as further evidence that Germany could slip back into recession at the end of the year due to a shrinking economy.
Industry, construction and energy suppliers together produced 1.4 percent less in September than in the previous month, according to the Federal Statistical Office. This is the biggest decline since March. Experts had only expected a mini drop of 0.1 percent.
Weak overall domestic demand and uncertain global developments continued to weigh on the economy, said LBBW expert Jens-Oliver Niklasch. "We also expect a decline in economic output in the final quarter. Hopes are pinned on the new year." In the third quarter as a whole, production was 2.1 percent below the spring level. The Federal Ministry of Economics stated that the latest economic data "points to a bottoming out in the third quarter and an upturn in industrial activity at the turn of the year".
"Latest economic data was a disappointment"
Economic expert Jupp Zenzen from the German Chamber of Industry and Commerce (DIHK) said that industry was currently living off the substance in its order books. "A turnaround in production is not yet in sight." Federal Economics Minister Robert Habeck emphasized that Germany is still feeling the effects of the Ukraine war, for example. "We still have high energy prices." There is also a weakness in the global economy - "also and especially in China, which is also an important market for German industry". It is therefore hardly surprising that industrial production is under high pressure and that energy-intensive production is being cut back due to high energy costs.
Commerzbank chief economist Jörg Krämer expects the slump in orders to continue in the coming months, including in construction, where more and more projects are being canceled. Added to this is the continuing weakness in the retail sector. "All in all, the German economy is likely to shrink again slightly in the fourth quarter." This means that the German economy is facing a new recession, after gross domestic product already fell by 0.1 percent in the summer quarter.
"The latest economic data was a disappointment across the board," said Andreas Scheuerle from DekaBank. "The economic cart, which was supposed to be rolling uphill, has actually rolled back a bit." The export-dependent industry alone produced 1.7 percent less in September than in the previous month. Energy production also fell by 1.7 percent.
IWH expert speaks of trend reversal
Construction output remained unchanged compared to the previous month. The construction industry is struggling with rising interest costs, which are making private and professional investors cautious. The sluggish economy is increasingly leading to more company bankruptcies. According to an analysis by the Halle-based IWH Institute, the number of insolvencies of partnerships and corporations in Germany amounted to 1,037 in October, which is two percent more than in September and 44 percent more than in October 2022.
IWH expert Steffen Müller spoke of a trend reversal. "Adjusted for working day effects, October was the month with the highest insolvency figures since the end of the pandemic." A gradual increase in bankruptcies is to be expected in the coming months. Meanwhile, positive signals are coming from the Kiel Institute's barometer for global trade. According to this, trade increased noticeably by two percent in October compared to the previous month. "The figures for global trade are stronger than they have been for a long time; only in March of this year was comparable growth achieved," said IfW expert Vincent Stamer.
Despite numerous trouble spots and a weak global economy, German companies are more likely to invest in international locations than in Germany. Global investment plans differ significantly from those in Germany, according to a survey of more than 3,600 companies conducted by the DIHK and the German Chambers of Commerce Abroad (AHK).
The construction industry in Germany, a significant portion of the overall industry, has been grappling with rising interest costs, making investors more cautious and leading to potential company bankruptcies. This trend was highlighted by IWH expert Steffen Müller, who spoke of a reversal in October, with 1,037 insolvencies, a 44% increase from October 2022.
German companies, facing challenging economic situations due to various factors, are increasingly investing in international locations instead of their home country. This shift in investment plans, as revealed by a survey conducted by the DIHK and the German Chambers of Commerce Abroad, suggests a shift in focus for German industry beyond its domestic landscape.
Source: www.ntv.de
