German industrial output numbers a reason to hope

Markets welcomed unexpectedly good German industrial output data on Friday after Europe's biggest economy posted a slight rise in trade, signs it was not finished with recession but was starting to see some hope.

German industrial output numbers a reason to hope
Photo: DPA

Industrial output was stable in March from February following months of gloom, though first-quarter output fell by 12 percent from the last quarter of 2008, Economy Ministry data showed.

“It is time to say goodbye to an unprecedented brutal recession in the industrial sector,” UniCredit chief German economist Andreas Rees said, noting the quarter-on-quarter decline was the steepest in German economic history.

He stressed however that it was the third positive set of hard data in two days for one of the world’s leading exporters, along with the trade numbers and industrial orders figures on Thursday.

Industrial production had slumped by 3.4 percent in Febuary from the previous month, and the monthly figure for March was much better than an analyst forecast of a 1.2 percent decline compiled by Dow Jones Newswires.

German exports ticked upwards from February for the first monthly rise since September meanwhile, another sign the country’s massive recession might be easing.

Exports gained 0.7 percent in March from February, ending a five-month run of declines, though they were an impressive 15.8 percent lower than in March 2008.

Imports rose by 0.8 percent from February and the combination left Germany’s trade surplus at €11.3 billion ($15.1 billion), down from €16.8 billion a year earlier, the National Statistics Office (Destatis) said.

That was better than an average analyst forecast of €8.7 billion however.

A breakdown of the production figures showed two bright spots.

Output of capital goods, those used to produce finished products and a German specialty, rose by a strong 2.5 percent, the first monthly rise since September.

And construction activity soared by 7.6 percent, making up in part an earlier slump owing to better weather conditions.

Industrial output in general was boosted by an exceptional effect however, Germany’s car scrapping premium which has given auto sales a huge boost.

“Recent positive impulses came from the car industry that has benefitted from economic stimulus measures at home and abroad,” the ministry acknowledged.

But Capital Economics economist Jennifer McKeown said “the latest data provide some hope that the slump in the vital German external and industrial sectors has begun to ease.”

Postbank economist Thilo Heidrich added: “Against the background of another drop we and the market had expected, this is a pleasing result.”

The output and trade figures completed a trifecta of positive releases, following Thursday’s increase in industrial orders.

They gained 3.3 percent in March from February, the first increase in six months, with foreign orders rising by an impressive 5.6 percent.

After two catastrophic quarters, the German economy is beginning to show faint signs of life.

Berlin is bracing for a massive six-percent drop in gross domestic product (GDP) this year, but the government expects growth to resume in 2010.

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German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.


With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.