German Industrial Slump Raises Recession Worries

(RTTNews) - A bigger-than-expected fall in industrial production together with a sharp decline in factory orders in Germany in March suggested that the first quarter economic performance was weaker than the official estimate, deepening the fears of recession.

Largely reflecting the contraction in auto production, industrial output dropped 3.4 percent from February, when production increased by a revised 2.1 percent, Destatis reported Monday. Economists had forecast a monthly fall of 1.3 percent in March.

On a yearly basis, industrial production growth improved to 1.8 percent from 0.7 percent in the previous month.

Excluding energy and construction, industrial output decreased 3.3 percent in March from February.

Energy production grew 0.8 percent monthly, while construction output fell 4.6 percent.

Production of capital goods declined 4.4 percent and that of intermediate goods fell 3.5 percent. Production of consumer goods also decreased in March, but only by 0.1 percent.

Data showed that the manufacture of motor vehicles and related parts declined 6.5 percent after an increase of 6.9 percent in February.

Decreases in production of machinery and equipment and construction output also accounted for the decrease in overall production.

In the first quarter, industrial production increased 2.5 percent from the previous quarter.

Data released last week revealed a 10.7 percent plunge in factory orders in March, which had offset the 4.5 percent increase in February.

Going forward, the picture for German industry remains mixed, ING economist Carsten Brzeski said, adding that some kind of short-term rebound is on the cards as the latest data is so weak.

There is a high chance of a downward revision to the first-quarter GDP growth, pushing Germany officially into a technical recession, the economist said.

Official data showed that the output in the largest euro area economy remained flat in the first quarter after a 0.5 percent contraction in the fourth quarter.

The International Monetary Fund forecast the German economy to shrink 0.1 percent this year and to expand 1.1 percent in 2024.