German production drops further
German industrial production dropped for the fourth month straight in August as factory activity faces a prolonged downturn, the Federal Statistical Office revealed on Monday.
Production slid 0.2% from July, driven by the slowdown in construction and soaring energy prices, marking the lowest index for output recorded in Germany this year.
German factories, as well as the country’s economy as a whole, continue to struggle with a “toxic” combination of poor external demand, including from China, shortages of skilled workers, high interest rates, and the protracted fallout from last year’s energy crisis.
“The situation is serious, and the mood in our industry is bad,” Markus Steilemann, president of the chemical association that represents industry giants such as BASF and Evonik Industries, told Bloomberg. He referenced a survey in the chemical sector, which revealed that the industry continues to decline due to weak demand and persistently high energy prices.
The remark came after a recent warning from several companies in Germany’s chemical industry, which said they might have to relocate parts of their production abroad because of unaffordable energy costs.
European Central Bank President Christine Lagarde has acknowledged that the weakness of the European Union’s largest economy is weighing on the entire bloc.
“Germany had built its economic model on very cheap energy supplies and on export opportunities, especially to China,” Lagarde told La Tribune Dimanche in an interview published Sunday, “The ongoing adjustment in the German economy is affecting the growth outlook.”
Experts say the fourth consecutive decline in German industrial production raises concerns about the country’s economic prospects in the second half of this year.
“In the face of tighter financing conditions, weak global demand, and higher energy prices, GDP is likely to have shrunk in the third quarter and might grow only marginally in the final quarter of 2023,” Bloomberg’s Martin Ademmer predicted.
According to some estimates, the country's gross domestic product (GDP) is likely to have contracted by 0.1% in the third quarter and is expected to shrink by as much as 0.6% in the whole year of 2023.
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