Economy
Industrial production in Germany falls
An electric arc furnace on the premises of a steel mill. Production in German industry fell significantly in the first month after the start of the Ukraine war. Photo: Jonas Walzberg/dpa
© dpa-infocom GmbH
The Ukraine war exacerbates supply bottlenecks and material shortages. This leaves clear traces in the German economy. The coming months are unlikely to be easy either.
Production in German industry collapsed significantly as a result of the Ukraine war in March. According to preliminary information from the Federal Statistical Office, total production fell by 3.9 percent compared to the previous month.
The Wiesbaden authority explained that there was a sharper decline at the beginning of the Corona crisis in April 2020, when it was 18.1 percent. Delivery bottlenecks and material shortages worsened as a result of the war. For example, the lack of wiring harnesses from Ukraine caused the auto industry massive problems in March.
Ifo: 80 percent of industrial companies about bottlenecks
After the last five increases in a row, industrial production has experienced a severe setback, mainly due to the Russian war in Ukraine, the Federal Ministry of Economics announced. In the auto industry, production fell by 14.0 percent in March. Mechanical engineering, which is also important, recorded a minus of 5.3 percent. The ministry explained that the war and the high raw material prices associated with it represent a further setback for industry, which was already burdened last year by delivery bottlenecks for important intermediate goods.
According to the Ifo Institute for Economic Research, a good 80 percent of the industrial companies surveyed complained about bottlenecks and problems with the procurement of preliminary products and raw materials in March. Commerzbank chief economist Jörg Krämer expects industrial production to trend downwards in the coming months. “On the one hand, China’s zero-corona policy is stalling supplies for German industry. On the other hand, Putin’s war of aggression unsettles consumers and companies in this country.”
Production of capital goods decreases
According to the assessment of the Association of German Chambers of Industry and Commerce (DIHK), industry is also facing major challenges in the coming months. “Supply chain problems in particular will still burden the manufacturing industry,” said DIHK economic expert Jupp Zenzen.
Manufacturing of capital goods fell by 6.6 percent in March. Energy production was 11.4 percent lower than in the previous month after rising significantly in February. In contrast, construction activities increased slightly by 1.1 percent.
Industrial production joins a series of weak economic data released this week. Exports and incoming orders also fell in March compared to the previous month. According to Thomas Gitzel, chief economist at VP Bank, the spring and summer months are likely to remain difficult for German industry.