German production higher than expected

German companies produced significantly more than expected in February. Even though exports have been sluggish, economists see signs of an end to the downturn.

The German economy surprisingly increased its production significantly in February. Industry, construction and energy suppliers together produced 2.1 percent more than in the previous month, the Federal Statistical Office said. This is the strongest increase since January 2023, when the monthly increase was 2.9 percent. Economists surveyed by the Reuters news agency had only expected an increase of 0.3 percent. In January growth was 1.3 percent.

This means that “the signs of a gradual economic bottoming out are solidifying,” said the Federal Ministry of Economics, commenting on the development. Leading indicators such as new orders in the manufacturing sector and the ifo business climate index had previously indicated this.

Industrial production alone increased by 1.9 percent, which was primarily driven by the automotive industry (plus 5.7 percent) and the chemical industry (plus 4.6 percent). In contrast, output in the equally important area of ​​mechanical engineering fell by 1.0 percent. The good performance in February is also thanks to the construction industry: there was an increase of 7.9 percent. Energy production, on the other hand, fell by 6.5 percent.

“Recession likely to end in summer”

Economists see a cautious recovery. “After two months of hard data for the first quarter, there is finally a reason for slight optimism that at least the economic downturn has come to an end,” said ING chief economist Carsten Brzeski, commenting on the figures. “The second increase in a row indicates a stabilization of the battered industrial production – especially since the energy-intensive sectors such as the chemical industry have also recovered again,” said Commerzbank chief economist Jörg Krämer.

“The burden caused by the recent increases in key interest rates and energy costs is slowly easing.” The recession in Germany is likely to end in the summer half of the year. However, unresolved structural problems continue to speak against a strong recovery.

Exports fall surprisingly

However, the current foreign trade data clouded the picture. Due to falling demand from Europe and China, exports in February surprisingly fell by 2.0 percent compared to the previous month to 132.9 billion euros. Imports, on the other hand, unexpectedly increased by 3.2 percent, reaching 111.5 billion euros for the second month in a row.

In January, exports rose by a significant 6.3 percent. Overall, exports to countries outside the EU rose slightly by 0.4 percent to 60.0 billion euros. There was a significant increase of 10.2 percent in trade with the USA.