Germany Industrial Production Unexpectedly Declines

Germany’s industrial production unexpectedly declined in June as supply shortages weighed on the manufacturing sector, data published by Destatis revealed on Friday.

Industrial output dropped 1.3 percent in June from May, when production was down by revised 0.8 percent. Economists had forecast production to grow 0.5 percent in June.

The economy ministry said the main reason for the decline in industrial production in the second quarter was supply bottlenecks for semiconductors, especially in the automotive sector, which are still causing problems at the moment.

The outlook for industrial activity as a whole remains cautiously optimistic in the view of continued high demand, the ministry said. Companies also continue to assess the export prospects as positive.

Compared with February 2020, the month before restrictions were imposed due to the corona pandemic, production was 6.8 percent lower in June.

The further decline in German industrial output in June, to 6.8 percent below its pre-pandemic level, underlines that the problems in the auto sector will hold back an otherwise strong economic recovery, Andrew Kenningham, an economist at Capital Economics, said.

It is now uncertain whether GDP will regain its pre-pandemic level by the fourth quarter of this year, as is widely expected, the economist added.

In June, industrial production excluding energy and construction decreased 0.9 percent from previous month. Energy production and construction output fell 0.6 and 2.6 percent, respectively.

Within industry, capital goods production showed a monthly fall of 2.9 percent and that of intermediate goods dropped by 0.9 percent. On the other hand, the production of consumer goods grew 3.4 percent.

Year-on-year, industrial output grew 5.1 percent, but slower than the 16.6 percent increase seen in May.

Elsewhere, a survey from ifo Institute showed that production expectations weakened in July due to supply bottlenecks for intermediate products. The production expectations indicator fell to 22 points in July from 27 points in June.

Expectations improved in the automotive industry and clothing industry in July.

Source: Read Full Article