German industrial production dips as momentum fades

FRANKFURT AM MAIN (AFP) – Germany’s economic momentum stumbled in August, as industrial production in Europe’s largest economy unexpectedly fell back after three months of growth, official data showed yesterday.

Industrial production declined 0.2 per cent month-on-month in August, compared with a climb of 1.4 per cent in July, Federal Statistics Agency Destatis said.

The data marks an interruption of the consistent recovery seen since the lifting of pandemic restrictions in the spring, and is well below a forecast increase of 1.5 per cent in an analysts survey by Factset.

“German industry is clearly struggling to gain further momentum,” said ING economist Carsten Brzeski, who called the data a “first setback” for the nation’s economy since the easing of coronavirus lockdowns.

In Germany’s all-important car industry, production fell 12.5 per cent compared with the previous month – partly due to summer shutdowns – and sank to around 25 per cent below the level of February 2020, the month before restrictions were imposed in Germany due to the pandemic.

Meanwhile, total industrial production in August was down 9.6 per cent compared with the same month a year earlier.

Production will not recover to pre-crisis levels “until well into 2021”, Capital Economics economist Andrew Kenningham said, even though “the outlook is better than in some countries”, helped by export demand and Germany’s generous short-time work scheme, called Kurzarbeit.

“This is the first decline after three sometimes sharp rises. You have to take a deep breath,” said Economist at LBBW Jens-Oliver Niklasch.

“The figures for new orders were still quite good, but the production figures show that the closing of the corona (virus) gap is unlikely to happen quite as quickly.”

On Tuesday, official data showed industrial orders rose in August by 4.5 per cent.

But an increase in coronavirus cases in Germany threatens to nip any recovery in the bud, with the highest number of new infections since April reported yesterday.

“Assessing this kind of backward-looking data is like looking at pictures of a great summer holiday; the economic prospects for the final quarter resemble the current view out of the window at 8am in the morning – grey and rainy,” Brzeski said.