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BASF factory in Ludwigshafen: Energy-intensive companies are cutting their production

Photo: Lilly / imagebroker / IMAGO

German companies surprisingly cut back their production significantly in December. Industry, construction and energy suppliers together produced 1.6 percent less than in the previous month, as the Federal Statistical Office announced.

This is not only the fourth decline in a row, but also the strongest since March 2023. In November there was a decline of 0.2 percent.

In 2023, production was 1.5 percent lower than in the previous year. “The most significant declines were recorded in the energy-intensive industries and energy production,” explained the statisticians. The industries at a glance:

  • The

    export-dependent industry

    alone produced 1.5 percent less in December than in the previous month.

  • The

    chemical industry

    in particular cut back its production: there was a sharp decline of 7.6 percent. This means that overall production in the chemical industry fell to its lowest level since 1995 in 2023.

  • The energy-intensive industries, which, in addition to chemistry, include

    glass, glassware and ceramics

    as well as

    metal production and processing

    , produced 5.8 percent less in December than in the previous month.

  • Mechanical engineers

    (minus 1.6 percent) and manufacturers of electrical equipment (minus 3.5 percent)

    also reduced their production.

  • “However, the increase in production in the automotive industry

    had a positive effect on the overall result

    ,” said the statisticians. There was an increase of 4.0 percent month-on-month.

  • Energy

    production

    grew by 4.1 percent at the end of last year due to the onset of winter.

  • Construction

    production,

    on the other hand, shrank by 3.4 percent. The construction industry is suffering from high interest costs, which are causing reluctance among private and professional investors.

There is unlikely to be a boom this year either, given high interest rates, expensive energy, geopolitical risks and a subdued global economy. “There are no signs of a turnaround yet,” said the Federal Ministry of Economics, commenting on the current development. “A domestically driven recovery is only likely to begin later in the year.”

In December, industrial orders increased by 8.9 percent compared to the previous month, the fastest they have been in three and a half years - but this was only due to an exceptionally large number of large orders, for example for aircraft. In 2023 overall, new business shrank by 5.9 percent.

Nevertheless, ING chief economist Carsten Brzeski sees the recent increase in industrial orders as “at least a vague light at the end of a tunnel that is increasingly looking like a very long one.” Domestic strikes and supply chain disruptions caused by the military conflict in the Red Sea made a further contraction in the German economy in the first quarter of the year even more likely, he said. "The industry is still stuck between economic and structural weakness."

mmq/dpa/Reuters