Concerns about a potential long-lasting economic decline in Europe’s largest economy intensified as German industrial production experienced its third consecutive monthly decrease in July.
According to seasonally adjusted data from the statistics agency Destatis, output in the “sick man of Europe” dropped by 0.8 percent compared to the previous month, following a 1.4 percent decline in June.
Analysts surveyed by FactSet had predicted a smaller decline of 0.35 percent.
In a separate announcement on Thursday, a German economic research group maintained its forecast of negative GDP growth for Germany in 2023.
In comparison, the UK experienced a 1.8 percent increase in production output in June, marking its strongest monthly growth for the Index of Production (IoP) since August 2020 when a 1.9 percent rise was recorded. This increase follows a 0.6 percent decline in May but positive growth in March and April, indicating the UK economy’s recovery from the impact of the Covid-19 pandemic, the war in Ukraine, and post-Brexit concerns.
Fears that Europe’s largest economy could be entering a prolonged downturn grew today after German industrial production fell for a third straight month in July
Output by the ‘sick man of Europe’ decreased by 0.8 percent compared with the month before, according to seasonally adjusted figures from statistics agency Destatis, following a 1.4-percent drop in June. Pictured: German Chancellor Olaf Scholz delivers a speech at the International Motor Show (IAA) in Munich, September 5
Germany’s crucial industrial sector has been grappling with various challenges in recent months, including inflation, high energy prices, and a slowdown in the Chinese economy, which have all impacted the country’s export-driven growth.
Destatis reported that production from May to July 2023 was lower than the previous three months, and in July, production in industries excluding energy and construction decreased by 1.8 percent compared to June.
The agency also noted a 2.9 percent decline in the production of capital goods and a 1 percent decrease in the production of consumer goods.
The decrease in industrial output in July followed a steep drop in industrial orders, as reported by Destatis a day earlier.
Germany’s 10-year government bond yield, a benchmark for the euro area, also experienced a 1.5 bps drop to 2.64 percent, ending a four-day upward trend.
Positive indicators include a 2.2 percent increase in energy production and a 2.6 percent increase in construction in July 2023.
The German economy, which entered a recession earlier this year and stagnated in the second quarter, is forecasted by the Institute for Economic Research (IFO) to have a GDP growth of -0.4 percent and revised its 2024 growth forecast from 1.5 percent to 1.4 percent.
In late August, it was reported that Germany’s economic outlook was deteriorating, with zero growth in the second quarter compared to the previous quarter.
These figures are a setback for the German government, which had raised its growth forecast for this year after avoiding a feared energy crisis caused by the war in Ukraine and cold temperatures.
However, the International Monetary Fund predicts that Germany will be the only major advanced economy to experience economic contraction in 2023.
Some observers have once again labeled Germany as the “sick man of Europe,” reminiscent of the late 1990s when the country faced economic challenges such as sluggish growth and high unemployment.
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