Merz, like Macron, is a political corpse: German industrial production is collapsing

"The summer brought no turnaround; the German economy is stagnating. This is shown by new production and order figures. The automotive industry contributed significantly to this.

 

Production in the manufacturing sector in Germany collapsed by 4.3 percent in August compared to the previous month. In industry in the narrower sense, i.e., excluding construction and energy generation, the decline was even 5.6 percent. With these figures, the Federal Statistical Office confirmed the continued difficult situation of the German economy on Wednesday. The previous day, the decline in incoming orders in August had already worried many observers.

 

Following the first hard economic data for August now available, economists see only a chance of very slight growth, if any, for the third quarter from July to September. There can be no talk of an upturn in German industry so far, commented Ralph Solveen of Commerzbank. "Industry will initially remain a drag on the German economy." The Federal Ministry of Economics expects economic development to remain "weak" in the third quarter.

 

In their joint forecast, the major economic research institutes expect the economy to stagnate slightly, growing by 0.2 percent, for the full year. Experts only anticipate growth of 1.3 percent for the coming year as a result of the expansionary fiscal policy. According to media reports, the Federal Ministry for Economic Affairs and Energy plans to endorse this forecast this Wednesday.

6.2 percent drop in mechanical engineering

 

The slump in industrial production is largely due to a significant one-off factor. Statisticians, like those previously reported for the automotive industry, point out that an unusually high number of factory holidays in the industry fell in August this year. This resulted in a drastic decline in auto production in August of 18.5 percent compared to the previous month. Such extraordinary fluctuations cannot be offset by the regular seasonal adjustment of industrial production data.

 

However, even excluding the automotive industry, industrial production fell by 2.5 percent in August. The equally important mechanical engineering sector reported a decline of 6.2 percent. In the less volatile three-month comparison, industrial production fell by 1.7 percent from June to August compared to the previous three months. In the five months since April, production has increased only once – the trend has been downward in the summer.

 

The outlook for the coming months does not point to a rapid recovery due to the federal government's debt-financed spending. Industrial orders fell for the fourth consecutive month in August, by 0.8 percent compared to the previous month, as the Federal Statistical Office announced on Tuesday. A similar dry spell was last seen at the beginning of 2022 following the events in Ukraine, according to the German Chamber of Industry and Commerce. Excluding highly volatile large orders, orders fell by 3.3 percent in August compared to the previous month, according to the Federal Statistical Office.

 

The decline in orders partly reflects the damaging effects of American import tariffs on goods from the European Union. At the beginning of the year, expectations of American tariffs had triggered advance orders, but now the trend is reversing. Orders from outside the eurozone fell by five percent in August. Demand from other eurozone countries is also weakening, falling by 2.9 percent in August.”