Germany’s Industrial Output Drops As Energy Prices Soar

Germany’s industrial production fell by 0.8% in August compared to July, amid a significant drop in output at energy-intensive industries, the German Federal Statistical Office said on Friday.

In the energy-intensive industrial branches, production fell by 2.1% in August 2022 compared with the previous month—a much steeper drop than the overall industrial production decline, the office said.

Production in the energy-intensive industrial branches in Germany has dropped by 8.6% since February 2022, the data showed.

Apart from the high energy prices, which have forced energy-intensive industries to curtail production or shut down factories, industrial production in Germany is still affected by the extreme shortage of intermediate products, the statistics office said. Supply chains are interrupted due to the Russian invasion of Ukraine, and some continue to recover from the COVID-related delays.

“Germany continues to descend into recession,” ING said today, commenting on the latest industrial production and retail sales data.

“German industry and the entire economy have not come to an abrupt stop but are rather in the middle of a long and gradual slide into recession,” said Carsten Brzeski, Global Head of Macro at ING.

“We don’t need a crystal ball to see a further weakening of German industry in the coming months. The full impact of higher energy prices will only be felt in the last months of the year. It is not only the price effect putting a burden on German industry but also the lack of industrial input goods (including industrial gas),” Brzeski added.

Last month, Bundesbank, the central bank of Germany, said signs were mounting that the German economy was slipping into a recession, which would deepen as we head into the winter months amid the ongoing natural gas and energy crisis. Economists at Bundesbank now expect a broad-based and longer-lasting decline in German economic activity.

By Tsvetana Paraskova for Oilprice.com

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