German industrial output unexpectedly sinks as rebound struggles
High interest rates and weak foreign demand weigh on the country’s export-oriented companies
GERMAN industrial production unexpectedly plunged in May, which could signal a faltering recovery in Europe’s biggest economy.
Output fell 2.5 per cent from the previous month, Germany’s federal statistics service said on Friday (Jul 5).
While April was revised up to a slightly positive reading, May’s outcome was below all 28 estimates in a Bloomberg survey of analysts.
Cars, machinery production and electrical equipment all saw drops of more than 5 per cent.
The figures come on the back of a release on Thursday showing a surprise slump in factory orders in May, retreating 1.6 per cent from the prior month.
The latest numbers for German investor sentiment also fell short of expectations, as did a gauge of business activity in the private sector.
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“Along with the latest weakening of business expectations in manufacturing, the persistent declines in orders suggest rather muted momentum in the coming months,” the country’s Economy Ministry said.
“Production will only stabilise when global trade recovers further and demand for industrial goods revives.”
Industry has been the weak spot in Germany’s economic rebound. High interest rates and weak foreign demand have been particularly painful for export-oriented companies, with the Ifo institute’s business climate index wrong-footing analysts in June by dropping.
Still, Germany’s economic recovery “is continuing”, the Bundesbank said in its latest monthly report. The central bank predicted an expansion of 0.3 per cent this year, with services and private consumption as the main drivers.
The government seal a delayed 2025 budget on Friday, including measures to boost growth.
With inflation coming down and wage growth still strong, the second half of the year is expected to see firmer growth. Consumer-price gains slowed to 2.5 per cent in June, feeding hopes that the European Central Bank will cut interest rates further. BLOOMBERG
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