German Industry Output Drops as Tariff Threats Weigh on Recovery
(Bloomberg) -- German industrial production declined in September, pouring cold water on hopes that the country’s factory slump may be bottoming out.
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Output fell 2.5% from the previous month, more than all economist estimates in a Bloomberg survey. The drop was broad-based, with meaningful retreats in the car and chemicals sectors.
The figures come a day after the Economy Ministry reported a surge in orders and suggested that the sector’s prolonged bout of weakness may come to an end by the end of the year. Despite Thursday’s disappointing data, it reiterated that view.
Separate numbers from the statistics office showed a 1.7% decrease in exports in September.
German industry is struggling to escape a prolonged malaise, weighed down by weak global demand, structural challenges at home and political uncertainty within the country and beyond.
Chancellor Olaf Scholz on Wednesday called for snap elections to be held next year after divisions escalated in his fractious three-party ruling coalition over how to revive the lackluster economy.
Across the Atlantic, US President-elect Donald Trump has threatened new tariffs to protect the American economy, which are bound to hurt trading partners.
German automakers, which send more vehicles to the US than to any other country, are facing outsized risks. That’s on top of struggles to transition to electric vehicles that have forced Volkswagen AG to consider unprecedented domestic plant closures and parts makers Schaeffler AG and ZF Friedrichshafen AG to slash thousands of jobs.
On Wednesday, BMW AG reported a drop in its profit margin to a four-year low after a costly recall and weak demand in China weighed on earnings. Third-quarter sales at Henkel missed estimates.
--With assistance from Kristian Siedenburg and Joel Rinneby.
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