Energy crisis, interest rates, material
Industrial production is falling more than it has been for a long time
05/08/2023 09:43 am
The energy crisis has been troubling the German economy for months. So far, however, it has not had the same impact on the productivity of German companies as it did in March. There is hardly any improvement in sight. Rising interest rates bring additional problems.
In March, German companies cut their production more than they had in a year. Industry, construction and energy suppliers together produced 3.4 percent less than in the previous month, as reported by the Federal Statistical Office. Economists had only expected a decline of 1.3 percent. Nevertheless, production in the first quarter picked up due to the strong growth in January and February, namely by 2.5 percent quarter-on-quarter.
“The significant decline in industrial production is also a counter-movement to the strong increases before – for example in the car industry,” said Commerzbank chief economist Jörg Kramer. “But the trend is that production should continue to fall somewhat in the coming months.”
“Another piece of bad news from German industry,” commented LBBW economist Elmar Völker on the development. “Today’s figures underline that the dangers of recession are by no means over.” Industry alone produced 3.3 percent less in March than in the previous month.
The automotive industry had a particularly large share in the decline: Production here collapsed by 6.5 percent compared to the previous month. The machine builders produced 3.4 percent less. The particularly energy-intensive sectors of the economy almost all reduced their emissions, including the chemical industry with minus 2.0 percent, according to the Federal Ministry of Economics.
Rise in interest rates slows down the willingness to invest
The construction industry reported a drop in production of 4.6 percent. You are struggling with higher interest and material costs, which means that many projects are no longer worthwhile. Energy suppliers, on the other hand, increased their generation by 0.8 percent.
German industry faces a difficult year in view of rising interest rates. “The general rise in interest rates should slow down investment plans,” said the chief economist at Hauck Aufhäuser Lampe Privatbank, Alexander Krüger. New business collapsed in March more than it has since the peak of the Corona crisis three years ago: Orders fell by 10.7 percent compared to the previous month.
Production could be supported by the easing of problems with the procurement of raw materials and preliminary products. In April, complaints from industrial companies about supply bottlenecks decreased for the seventh month in a row. Only 39.2 percent of the companies reported problems, the lowest value in around two years.