German industrial output rises but conflict darkens outlook

German industrial production rose again in January, official figures showed Tuesday, but the positive picture was likely to be upended by the impact of the war in Ukraine.

An employee at the Volkswagen plant in Zwickau.
An employee at the Volkswagen plant in Zwickau. Photo: picture alliance/dpa | Hendrik Schmidt

Production was up 2.7 percent on the previous month, according to seasonally adjusted figures from the federal statistics agency Destatis, after rising by 1.1 percent in December.

It follows the publication a day earlier of figures showing incoming orders for industry had also risen by 1.8 percent.

The data showed how “the German economic rebound could have looked”, said Carsten Brzeski head of macro at the bank ING, as Europe’s largest economy looked to shake off the drag caused by widespread supply bottlenecks and coronavirus-related restrictions.

The two together caused the economy to shrink by 0.3 percent in the last three months of 2021.

But the Russian invasion of Ukraine at the end of February “has changed everything” for the economic outlook, Brzeski said.

With Germany’s high dependence on imports of Russian gas, the rise in energy prices caused by the conflict could “shave off one percentage point of
GDP growth this year”, Brzeski said.

READ ALSO: German industry still waiting on post-virus boom 

The additional upheaval in supply chains “will weigh on industrial production”, too, he said, with the impact felt particularly hard by the flagship automotive sector, which has a significant network of suppliers in Ukraine.

The war would “slow” the rebound, with the strength of the impact “currently unclear”, the economy ministry said in a statement.

While the production figures in January were 1.8 percent above the same month last year, they still trailed the pre-pandemic level by three percent, according to Destatis.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Germany’s BMW to put €1 billion into electric vehicles in Austria

German auto manufacturer BMW said on Monday it would invest "around one billion euros" in the production of electric vehicles at a plant in Austria from 2025.

Germany's BMW to put €1 billion into electric vehicles in Austria

Altogether, 600,000 units a year should roll off the line at the factory in Steyr under the investment plan, set to run until 2030, BMW said in a statement.

From 2025, BMW will “develop and produce the next generation of e-drives” at the Austrian site, BMW’s production chief Milan Nedeljkovic said.

The refurbishment of the plant will see two new production lines added and the location expanded by 60,000 square metres.

The new facilities would require €710 million in investment, while €230 million would be dedicated to boosting vehicle development at Steyr.

“Around half” the 4,400 employees at the site would be working on “e-mobility” by 2030, plant boss Alexander Susanek said.

The Bavarian manufacturer said it aimed to have two million electric vehicles on the road by 2025, promising 13 new electric models and a revamp of its Mini brand.

BMW has already said it will spend €400 million to upgrade its home factory in Munich to produce electric vehicles.