Friday, April 9th, 2021
Despite full order books
German production shrinks unexpectedly
The companies are not lacking in orders – nevertheless they are producing significantly less in February than in the previous month. That comes as a surprise: Economists actually predicted an increase in production. The decline is not due to low demand, but for another reason.
Despite full order books, German companies put the brakes on production again in February. Industry, construction and energy suppliers together produced 1.6 percent less than in the previous month, as the Federal Ministry of Economics announced. Despite the corona pandemic, economists had expected an increase of 1.5 percent after there had already been a decrease of 2.0 percent in January.
Foreign trade did better: exports grew by 0.9 percent in February, also due to the booming China business, and thus for the tenth month in a row. Imports even increased by 3.6 percent. “German foreign trade continues to grow and is slowly approaching the pre-crisis level again,” said the president of the export association BGA, Anton Börner.
“What is currently weighing on German industry is not a lack of demand,” said DekaBank economist Andreas Scheuerle about the unexpected decline in production. “Rather, there are delivery bottlenecks for raw materials and components as well as tight transport capacities, especially on the route between Asia and Europe.” As a result, production has been burdened for some time.
Gross domestic product is expected to shrink
The automotive industry, for example, is complaining about a shortage of semiconductors. “This production backlog in turn allows the order backlog to rise to a record level,” said Scheuerle. “In the future, the processing of the order backlog and the refilling of the warehouse are likely to generate additional economic impulses.”
However, with the dip in February, it becomes more likely that the German economy contracted in the past first quarter. UniCredit economist Andreas Rees expects a decline in gross domestic product of around 2.5 percent. In the current spring quarter, however, industry is likely to become a pillar of the economy again. “We are assuming that the German economy will grow significantly this year,” said Economics Minister Peter Altmaier, who has so far assumed an increase of three percent. Europe’s largest economy should return to its pre-crisis level in 2022.
A strong recovery in 2021 speaks for itself: Production expectations are currently higher than they have been in 30 years. The corresponding indicator jumped 8.9 to 30.4 points in March, as the Ifo Institute announced in its monthly survey of companies. “The order books are filling up, and there is still some catching up to do after the crisis year,” said Ifo expert Klaus Wohlrabe.
Germany is benefiting from the global economic recovery
The export-dependent German industry can benefit from the upturn in world trade in the coming months. “The recovery of the global economy leads us to expect further repair of supply chains and thus further growth in exports,” said the chief economist of Bankhaus Lampe, Alexander Krüger. “The all-clear for the sector will only be given if a pandemic is pushed back in this country as well.”
After the historic Corona-related collapse in 2020, the global economy is likely to grow by 6.0 percent this year and thus not more than it has been since 1976, predicts the International Monetary Fund. The main drivers for goods “Made in Germany” are the USA and China.
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