German economy faces uphill climb as industrial output falls

BERLIN, July 8 (Reuters): A quick economic recovery for Germany looked less likely on Friday as data showed a surprising drop in industrial production.

And the Federal Statistics Office said that production decreased by 0.2% in May compared to the previous month, according to Reuters. Analysts polled by Reuters had expected production to slow.

Carsten Brzeski, chief economist at ING, pointed to a “toxic mix” of a bad outlook, meager ranking books and the need to build up inventories, as well as structural factors such as the war in Ukraine and the transition to cleaner energy.

“The country’s international competitiveness has already deteriorated in recent years and is likely to deteriorate further,” Brzeski said.

The industrial production data was a reminder of the uphill climb in Europe’s largest economy if it is to emerge from recession after a surprise surge in orders in May fueled some optimism on Thursday.

“After yesterday’s very good numbers on incoming orders, today we are again faced with disappointment,” said Jens-Oliver Niklasch of LBBW Bank.

He added, “We may only see a recession in the second quarter, but a renewed decline in economic output is likely.”

The bureau provides a breakdown of industrial production data on its website.

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