For the fourth straight month in a row, German industrial production fell in August, as factory activity showed signs of a more prolonged contraction, according to new data released by the German Federal Statistics Office Destatis on Monday.
As construction has slowed down, and energy prices have surged, production fell 0.2% from July, reaching the lowest level for the German index recorded in 2023.
Factories in Germany, as well as the nation’s overall economy, are coping with a “toxic” mix of shortages of skilled workers, high interest rates, the after-effects of the energy crisis of 2022, and poor external demand, including China.
Markus Steilemann, president of the chemical association that represents industry giants such as BASF and Evonik Industries, said in an interview with Bloomberg, “The situation is serious, and the mood in our industry is bad.”
He added that a recent survey in the chemical sector showed a continued decline in the sector, as high energy prices intersect with persistently low demand.
The comment was made on the heels of a warning from several chemical producers in Germany that they may have to move parts of their production abroad due to the unaffordable energy costs in Germany right now.
Christine Lagarde, the President of the European Central Bank, has made note of the fact that the economic issues in Germany have begun to weigh on the economy of the entire European Union.
In an interview with La Tribune Dimanche published on Sunday, Lagarde said, “Germany had built its economic model on very cheap energy supplies and on export opportunities, especially to China. The ongoing adjustment in the German economy is affecting the growth outlook.”
Analysts worry that with Germany enduring a fourth consecutive contraction in industrial production, now the country’s economic prospects for the second half of the year will need to rebound strongly to avoid seeing a continued decline or stagnation that could impact the broader EU economy.
Bloomberg’s Martin Ademmer predicted, “In the face of tighter financing conditions, weak global demand, and higher energy prices, GDP is likely to have shrunk in the third quarter and might grow only marginally in the final quarter of 2023.”
Some analysts estimate that the nation’s gross domestic product (GDP) will likely contract by 0.1% in the third quarter, only to then to see the final yearly number come in as a contraction of 0.6% for the whole of 2023.
