Financial markets/economy

German economy slows again, industrial production down by 3%

Posted by MoneyController on 09.02.2024

Following a 0.3 per cent fall in GDP in 2023, Germany is hit by further negative data on industrial production.

The decline in German industrial production

The economic crisis in Germany seems to be worse than expected. Data on industrial production (year-on-year comparison with December 2022) are worse than expected: -3% against forecasts of -2.4%. For December, data from the Federal Statistical Office also point to a cyclical decline in industrial production of 1.6%: this is worse than both expectations (-0.5%) and the November result (-0.2%).

The causes of the economic crisis in Germany

There are many reasons for the current crisis in the German economy. In 'Sole 24 Ore' Isabella Bufacchi points to weak domestic and foreign demand, a still unresolved energy crisis, high interest rates set by the ECB, reduced public spending, bottlenecks in supply chains and international tensions, including those related to the Suez Canal (Bufacchi writes that the ports of Bremen and Hamburg have seen a 25% drop in the number of incoming merchant ships).

Energy-intensive sectors hit hardest

That the energy crisis is still weighing on the country's economic momentum is shown by the data for the most energy-intensive sectors of German industry: the German economic data show a 7.6% contraction in the chemicals sector - as Bufacchi writes, production in this sector has never been so low since 1995 - but the production of metals, glass and ceramics (other energy-intensive sectors) also recorded a 5.8% contraction. Other sectors of the economy also contracted (real estate, mechanical engineering, electronic equipment); one of the few positive exceptions was car manufacturing.

Supply chains and weak exports

Also in Il Sole 24 Ore, Fabrizio Onida tries to make sense of the situation and explain the reasons for the crisis in Europe's biggest economy: Germany is a transforming and export-oriented economy; it is therefore normal that it suffers from a) problems in the supply chain of goods and energy and b) a decline in orders from abroad.

See also

Optimistic markets for the US, more complicated situation for Europe

How can the DAX set new records when Germany is in recession?

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