Decline In German Industrial Output Biggest In 9 Months

Germany’s industrial production declined the most in nine months in December driven by the sharp fall in output of intermediate goods, data published by Destatis showed Tuesday.

Industrial production slid 3.1 percent on a monthly basis, reversing the 0.4 percent rise in November.

This was the biggest fall since last March, when output was down 4.2 percent and also larger than the expected 0.7 percent decline.

Within industry, the production of consumer goods gained 0.3 percent and that of capital goods remained unchanged in December.

On the other hand, intermediate goods output decreased 5.8 percent due to widespread contraction across the sub-sectors. The monthly fall in the manufacture of chemicals and chemical product was particularly strong.

Excluding energy and construction, industrial output decreased 2.1 percent in December.

Data showed that the energy production decreased 2.3 percent and the construction output plunged 8.0 percent from the previous month.

Year-on-year, industrial output fell 3.9 percent after a 0.5 percent drop in November.

In 2022 as a whole, industrial production was 0.6 percent lower than in 2021, and down 5.0 percent from the pre-crisis year of 2019.

“Either this data will be strongly revised upwards in the coming months or the German economy entered hibernation in December,” ING economist Carsten Brzeski said. Despite the latest optimism reflected in improving sentiment indicators, economic hibernation is unlikely to end any time soon, the economist said.

Commerzbank senior economist Ralph Solveen noted that the decline in production in the energy-intensive sectors was the major reason for the overall fall in industrial output. As special factors led to the weakness in energy-intensive sectors, some counter-movement can be expected in January, the economist said.

Nonetheless, in the view of the continuing downward trend in incoming orders, it is becoming increasingly likely that value added in industry will shrink in the coming months, Solveen added.

The economy had contracted 0.2 percent in the fourth quarter. The German government expects the economy to avoid a recession this year with 0.2 percent growth.

The International Monetary Fund projected Germany to grow just 0.1 percent in 2023 and 1.4 percent next year.

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