Industrial production records sharp decline
Despite some signs of improvement, production in Germany shrank significantly in May, according to the Statistical Federal Office. It marked the largest decline since the end of 2022. Economists are alarmed by the setback and see it as a bad omen for the German economy.
The production of German industry is declining sharply. In May, total production fell by 2.5% compared to the previous month, as reported by the Statistical Federal Office in Wiesbaden. This is the most significant decline since the end of 2022. Analysts had expected a slight increase of 0.1% on average. Production fell by 6.7% compared to the previous year.
"The significant decline in industrial production once again makes it clear that a rapid and marked economic recovery is not in sight everywhere," said Commerzbank Chief Economist Jörg Kraemer. After economic output stagnated in the second quarter, only a feeble upward trend can be expected. The weak production data follow disappointing order numbers from the previous day. Industrial orders in May fell for the fifth month in a row. The decline on a monthly basis was 1.6%, and in the year-on-year comparison, 8.6% fewer orders were received.
"Another bad news from industry," commented Economist Jens-Oliver Niklasch of Landesbank Baden-Württemberg on the new data. "It seems that a turnaround for the better is further away than ever." The German economy is experiencing its second year of stagnation in a row.
However, there had recently been some bright spots: Business sentiment had improved slightly, several economic institutes had raised their growth forecasts - albeit from a low base. But all of this could be at risk again: "The German economy is losing steam again," explained Chief Economist Carsten Brzeski of ING Bank.
The Federal Ministry of Economics commented cautiously on the industry's conjuncture in a statement. "Only in the course of the further recovery of world trade and the gradual revival of demand for industrial goods can production stabilize."
In detail, only the energy sector could impress in May. Its output increased by 2.6% compared to the previous month. However, industrial production of goods fell by 2.9%. Activity in construction was also significantly weaker, with a decline of 3.3%.
The economic situation in Germany is causing concern, with the Federal Statistical Office reporting a 6.7% decrease in production for the industry sector compared to the previous year. This decline in industrial output could potentially impact the overall economic growth of the country. Despite some positive signs like improved business sentiment and revised growth forecasts, the German economy has been experiencing a second year of stagnation.
