Brandenburg Gate in Berlin, Germany

Germany Industrial production July 2023

Germany: Industrial output drops more than expected in July

Industrial output decreased 0.8% in month-on-month terms in July, which was a less-pronounced contraction than June’s 1.4% decrease. However, the decline was sharper than expected by the market. Looking at the details of the release, construction sector production gained steam, while energy output gained momentum. However, manufacturing production dropped at a faster pace, and the contraction in mining and quarrying output worsened.

On an annual basis, factory output dropped 2.1% in July, which was below June’s 1.5% fall and marked the worst result since December 2022. Meanwhile, annual average variation of industrial production was steady, coming in at June’s 0.1% in July.

The data bodes poorly for GDP growth in the third quarter. The industrial sector continues to be weighed on by factors such as high interest rates, elevated natural gas prices and weak demand from China.

Berenberg’s Holger Schmieding said:

“German manufacturing has fallen into a significant downturn that will likely push the entire economy back into at least a mild recession in H2 2023. The risk to our forecast that German GDP will contract by 0.1% qoq in Q3 and by 0.3% qoq in Q4 this year is tilted clearly towards a larger decline.”

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