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German industrial output up but conflict darkens outlook

FRANKFURT (AFP) – German industrial production rose again in January, official figures showed yesterday, but the positive picture was likely to be upended by the impact of the war in Ukraine.

Production was up 2.7 per cent on the previous month, according to seasonally adjusted figures from the federal statistics agency Destatis, after rising by 1.1 per cent in December.

It follows the publication a day earlier of figures showing incoming orders for industry had also risen by 1.8 per cent.

The data showed how “the German economic rebound could have looked”, said head of macro at the bank ING Carsten Brzeski as Europe’s largest economy looked to shake off the drag caused by widespread supply bottlenecks and coronavirus-related restrictions.

The two together caused the economy to shrink by 0.3 per cent in the last three months of 2021.

But the Russian invasion of Ukraine at the end of February “has changed everything” for the economic outlook, Brzeski said.

With Germany’s high dependence on imports of Russian gas, the rise in energy prices caused by the conflict could “shave off one percentage point of GDP growth this year”, Brzeski said.

The additional upheaval in supply chains “will weigh on industrial production”, too, he said, with the impact felt particularly hard by the flagship automotive sector, which has a significant network of suppliers in Ukraine.

The war would “slow” the rebound, with the strength of the impact “currently unclear”, the Economy Ministry said in a statement.

While the production figures in January were 1.8 per cent above the same month last year, they still trailed the pre-pandemic level by three per cent, according to Destatis.


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