Production in the manufacturing sector in Germany fell by 4.3 percent in August compared to the previous month. In industry in the narrower sense, i.e. excluding construction and energy production, the decline was as much as 5.6 percent. With the figures on Wednesday, the Federal Statistical Office confirmed the continued difficult situation of the German economy. The day before, the decline in incoming orders in August had already worried many observers. Based on the first hard economic data for August now available, economists see only a very small chance, if any, of growth in the third quarter from July to September. There is currently no talk of an upswing in German industry, commented Ralph Solveen from Commerzbank. “The industry will initially remain a brake on the German economy.” The Federal Ministry of Economics expects economic development to be “still weak” in the third quarter. For the year as a whole, the major economic research institutes expect in their joint forecast that the economy will be little more than stagnant, with an increase of 0.2 percent. Experts are only expecting an increase of 1.3 percent next year as a result of the expansionary fiscal policy. According to media reports, the Federal Ministry of Economics wants to agree with this forecast this Wednesday. Minus of 6.2 percent in mechanical engineering The collapse in industrial production is largely due to an important special factor. Like the automotive industry before them, the statisticians point out that an unusually large number of factory holidays in the industry fell in August this year. This resulted in a drastic decrease in car production in August of 18.5 percent compared to the previous month. Such extraordinary fluctuations cannot be compensated for by regular seasonal adjustment of industrial production data. But even excluding the automotive industry, industrial production fell by 2.5 percent in August. Mechanical engineering, which is also important, reported a decline of 6.2 percent. In a less volatile three-month comparison, industrial production fell by 1.7 percent from June to August compared to the previous three months. In the five months since April, production has increased only once – the trend has been downwards in the summer. The prospects for the coming months do not point to a quick recovery due to the federal government’s debt-financed spending. Incoming orders from industry fell for the fourth month in a row in August, by 0.8 percent compared to the previous month, as the Federal Statistical Office announced on Tuesday. The last time there was a similar dry spell was at the beginning of 2022 after the start of the Russian attack on Ukraine, according to the German Chamber of Commerce and Industry. If one excludes the strongly fluctuating large orders, orders in August fell by 3.3 percent compared to the previous month, according to the Federal Statistical Office.More on the subject Show more The decline in orders partly reflects the damaging consequences of American import tariffs on goods from the European Union. At the beginning of the year, the expectation of American tariffs triggered orders to be brought forward, but now the trend is reversing. Orders from outside the euro zone fell by five percent in August. Demand from other countries in the euro area is also weakening and fell by 2.9 percent in August. Economists cited the 4.7 percent increase in domestic orders in August as a glimmer of hope. The Federal Ministry of Economics sees this as a sign that the industry is bottoming out. The Federal Ministry of Economics explained that the once again high proportion of large domestic orders for capital goods indicates increasing orders for defense equipment. This suggests that, at least in the area of defense, the additional spending initiated by the federal government is already having an impact on the economy.
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