This article was written by Alexander Weber. It appeared first on the Bloomberg Terminal.
German industrial production sank by the most in a year — raising the risk that Europe’s largest economy slipped into a winter recession.
Output dropped 3.4% in March, more than the 1.5% decline economists had predicted in a Bloomberg survey. The decrease was especially pronounced in the automotive sector, according to the statistics office.
While the data arrive with a big lag and more recent releases suggest the economy overall is expanding, the unexpectedly poor manufacturing performance may yet see the first-quarter reading for gross domestic product lowered.
That means Germany could record a recession between October and March after teetering on the edge of one since Russia attacked Ukraine and inflation took off. A preliminary estimate for the first three months of 2023 was for stagnation, following a 0.5% contraction in the fourth quarter.
Monday’s numbers follow a more than 10% slump in March factory orders, with ING economist Carsten Brzeski pointing to weakness elsewhere too.
“All German macro data in March plunged,” he said in a report to clients. “Retail sales and exports dropped sharply, and together with today’s industrial-production data, have increased the chance of a downward revision to first-quarter GDP growth.”
With demand shrinking as consumers prioritize services over goods consumption, manufacturers are still relying on backlogs of work built up during the pandemic. That’s supported production of late, as supply-chain bottlenecks eased, but may not last.
Bloomberg
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