Fall In German Industrial Production Exceeds Expectations

Reflecting weak production of energy and pharmaceutical products, Germany’s industrial output declined more than expected in May, darkening economic outlook.

Industrial production posted a monthly fall of 0.2 percent in May in contrast to the 0.3 percent increase in April, Destatis reported Friday. Output was forecast to drop 0.1 percent.

The decline was largely driven by the sharp 13.1 percent fall in output of pharmaceutical products.

The decline of 7.0 percent in energy production also had a negative effect on overall production. Meanwhile, output of motor vehicles, trailers and semi-trailers logged a monthly growth of 4.9 percent.

Excluding energy and construction, industrial production gained 0.2 percent, data showed. Construction production decreased 0.4 percent.

Production of capital goods grew 1.3 percent, while consumer goods production was down 1.2 percent and intermediate goods dropped 0.5 percent.

On a yearly basis, industrial production grew 0.7 percent, following a 1.7 percent rise in April.

Data released on Thursday showed that factory orders registered a notable 6.4 percent rise in May. But the increase was underpinned by the surge in demand for volatile ‘other transport equipments’.

ING economist Carsten Brzeski said monthly data for April and May of the second quarter have not taken away the risk of a further contraction of the German economy. “This would make it the first time since 2008 that the economy shrinks for more than two consecutive quarters,” the economist added.

Weak domestic and external demand are likely to increasingly weigh on production, Capital Economics’ economist Franziska Palmas said. The economist expects fall in industrial output to be one of the factors keeping the German economy in recession in the rest of 2023.

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