German production drops further

Lazy eyes listen


German industrial production fell for the fourth month in a row in August, as industry activity continues to fall, according to the Federal Statistical Office on Monday.

Production fell 0.2% from July to August, owing to a slowdown in construction and rising energy prices, marking the lowest output index recorded in Germany this year.

German companies, as well as the country’s economy as a whole, are still dealing with a “toxic” combination of bad external demand, notably from China, skilled labour shortages, high interest rates, and the long-term consequences of last year’s energy crisis.

“The situation is serious, and the mood in our industry is bad,” said Markus Steilemann, head of the chemical group that represents industry titans such as BASF and Evonik Industries. He mentioned

a survey in the chemical sector, which revealed that the industry continues to decline due to weak demand and persistently high energy prices.

The remark came after a recent warning from several companies in Germany’s chemical industry, which said they might have to relocate parts of their production abroad because of unaffordable energy costs.

European Central Bank President Christine Lagarde has acknowledged that the weakness of the European Union’s largest economy is weighing on the entire bloc.

“Germany had built its economic model on very cheap energy supplies and on export opportunities, especially to China,” Lagarde told La Tribune Dimanche in an interview published Sunday, “The ongoing adjustment in the German economy is affecting the growth outlook.”

The fourth consecutive decrease in German industrial production, according to experts, raises concerns about the country’s economic prospects in the second half of this year.

“In the face of tighter financing conditions, weak global demand, and higher energy prices, GDP is likely to have shrunk in the third quarter and might grow only marginally in the final quarter of 2023,” Bloomberg’s Martin Ademmer projected.

According to some projections, the country’s gross domestic product (GDP) dropped by 0.1% in the third quarter and is anticipated to contract by up to 0.6% for the entire year of 2023.