German industrial output falls but less than feared

FRANKFURT — German industrial production fell in March but less than expected, official data showed Wednesday, as Europe’s biggest economy struggles to recover following a turbulent period.

Output slipped 0.4 percent month-on-month, federal statistics agency Destatis said, following strong increases in January and February.

But analysts surveyed by financial data firm FactSet had forecast a drop of 1 percent for March.

Despite the weak data, the economy ministry said that recent improvements in the business climate and activity surveys pointed to “a further recovery in industrial production over the course of the year”.

The German economy was hit hard in 2023 by high inflation, a manufacturing slowdown, and weakness in key trading partners, and contracted slightly.

READ: German economy buffeted by ‘perfect storm’

However, slowing inflation and a string of other positive signs have suggested in recent times it was making a recovery, albeit slowly.

March’s industrial production figures showed decreased activity in the mechanical engineering and pharmaceutical sectors but slight increases in the auto, electrical equipment, and metal products sectors, according to the economy ministry.

Production in the construction sector — which suffered a sharp downturn last year — continued to rebound, with a one percent increase on the previous month.

Recent weeks had generally seen “encouraging and more positive data” that had been “balm for the German economic soul,” said ING bank economist Carsten Brzeski.

READ: German exports up in March but weak orders spoil party

But Wednesday’s “industrial production data is a good reminder that a bottoming out does not automatically lead to a strong recovery,” he added.

The German economy grew marginally at the start of the year, defying earlier predictions that it would slip into a recession.

And last month the government slightly increased its economic forecasts for 2024, predicting growth of 0.3 percent instead of 0.2 percent.