German Recession Threatens After Decline in Industrial Production


Germany’s industrial production fell much more than expected in March. This was mainly due to a weak performance in the country’s important auto sector. The weakening production is fueling fears that the largest economy in Europe is still heading for a recession.


Production fell 3.4 percent in March compared to the previous month, the German statistics agency Destatis reported. In February, there was still an increase of 2.1 percent. Economists polled by news agency Reuters had expected a fall of 1.3 percent. According to the statistics office, production in the first quarter was 2.5 percent higher than in the last quarter of 2022.

“After a buoyant performance in industrial production at the start of the year, there was an unpredictably sharp decline in March,” said the German Ministry of Economic Affairs. Manufacturing of motor vehicles and auto parts fell 6.5 percent from the previous month. In addition, production of machinery and equipment fell by 3.4 percent, and production in the construction sector fell by 4.6 percent.

It appeared that German factory orders had decreased by 10.7 percent in March. That was the most significant monthly decline since the height of the corona pandemic in 2020. “German industry is increasingly suffering from global interest rate hikes, which are increasingly slowing down the economy,” said Commerzbank chief economist Ralph Solveen. “The risks of a recession in Germany are increasing.”

In March, retail sales and exports also fell sharply, raising the likelihood of a downward revision in gross domestic product (GDP) in the first quarter, ING chief economist Carsten Brzeski warned. “A downward revision would mean that the economy still ends up in recession,” said Brzeski.

At the end of April, Destatis announced that the growth of the German economy had stagnated in the first quarter or showed neither growth nor contraction compared to the fourth quarter of last year. In the last three months of 2022, Germany’s economy contracted by 0.5 percent. Germany narrowly avoided a recession. A recession is demarcated as two-quarters of contraction in a row.

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