Germany slides into recession; retail sales drop

11 Oct '22

2 min read

Pic: Shutterstock/ Robert Kneschke

In August 2022, Germany’s retail sales went down by 1.3 per cent, from an increase of 0.7 per cent in July as the country slides into recession, as per a recent report. The country’s industrial production in real terms was down by 0.8 per cent on the previous month on a price, seasonally and calendar-adjusted basis, from an upwardly revised stagnation in July.

Over the year, industrial production was up by 2.1 per cent, as per a study by financial services company ING. Ongoing supply chain frictions as well as the low water levels in German rivers were the main reasons behind this drop in industrial activity.

Production in the energy sector was down by 6.1 per cent month-on-month (MoM) and the construction sector by 2.1 per cent. Production in the energy-intensive sectors was down by 2.1 per cent MoM and by 8.6 per cent compared with February this year, as per the statistical office.

At the start of the year, production expectations were close to all-time highs but since the start of the war in Ukraine they have gradually come down, with no end currently in sight.

Order books were richly filled at the start of the year and companies were filling inventories. Since then, new orders have dropped in almost every single month, and actual production has weakened since the summer. The full impact of higher energy prices will only be felt in the last months of the year. It is not only the price effect putting a burden on German industry but also the lack of industrial input goods.

High energy prices will increasingly weigh on private consumption and industrial production, making a contraction of the economy inevitable, the ING report added.

Fibre2Fashion News Desk (NB)

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