Fears of German recession grow after sharp decline in industrial output

By Thomas Brooke
3 Min Read

German factory orders fell sharply in March as German industry suffered its sharpest decline since during the Covid-19 pandemic, new data released by the Federal Statistical Office show.

Industrial orders dropped by 10.7 percent from the previous month, the largest month-over-month decline since 2020.

Output also fell by 3.4 percent, significantly more than the 1.3 percent estimated by financial analysts.

Poor performance across the car industry in particular impacted the data, with manufacturing of motor vehicles and parts dropping by 6.5 percent. Considered the jewel of German industry, the automotive sector employs around 12 percent of the country’s manufacturing labor force and generates some €180 billion in revenue through the production of esteemed brands such as Volkswagen, Mercedes-Benz and BMW.

Construction output also declined by 4.6 percent over February, while machinery production fell by 3.4 percent.

“After a buoyant performance by industrial production at the beginning of the year, there was an unexpectedly sharp decline in March,” the economics ministry said, as cited by Reuters.

“German manufacturing is suffering more and more from the global rate hikes, which are increasingly applying the brakes on the economy,” Ralph Solveen, the chief economist at Commerzbank added.

The data has once again sparked growing fears of a recession looming for Europe’s powerhouse. This fear was dismissed by experts only a week ago after a 0.5 percent contraction in the German economy in the last quarter of 2022 was followed by stagnation in the first quarter of 2023.

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“The German economy remained stuck in the mud at the start of 2023, only barely avoiding recession,” Pantheon Macroeconomics’ chief eurozone economist Claus Vistesen said at the time.

Remix News previously reported on the woes of German business owners back in October after Federal Statistical Office data revealed a sharp rise in the number of insolvency applications being filed by companies, up 18.4 percent over the previous month.

Meanwhile, a poll at the time showed that a third of German companies (32 percent) were resorting to either offering reduced working hours to employees or enforcing involuntary redundancies.

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