Germany economy crisis: Trouble for Angela Merkel as industrial production SLUMPS

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The car industry and clothing manufacturers were among the hardest hit as production increased in just one sector of the economy during the coronavirus pandemic. Federal Statistical Office data revealed the German automotive industry saw production fall by a quarter from 2019. Measured in terms of sales, the automotive industry is Germany’s most important sector, employing 809,000 people across almost 1,000 companies and generating annual revenues of around £328bn.

The only branch of the economy in which production has increased year-on-year was the wood industry

German statistic office

The statistics show clothing manufacturing companies were also badly affected as they produced a fifth less in 2020 than the previous year.

Production plummeted by 56.1 percent last April compared with the same month in 2019.

In the leather, leather goods and shoe sector, production fell by a total of 17.1 percent. At its peak in May there was a 46.5 percent decline.

There was comparatively little decline in production in the food and feed industry and the chemical industry with 2.8 and 1.1 percent respectively.

The mechanical engineering industry produced 13.8 percent less, while the metal industry saw a decline of 13.3 percent.

A Federal Statistics Office report said: “The only branch of the economy in which production has increased year-on-year was the wood industry.

“The production of wood, wicker and cork goods – excluding furniture – increased by 3.1 percent.”

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Despite the bleak figures, Germany’s central Bundesbank said it expected to see the economy back on the road to recovery from spring onwards and noted corporate sentiment was also improving.

Its monthly report said: “With falling infection rates, the wider availability of vaccines and the gradual easing of lockdown measures, the current factors that are slowing things down should gradually disappear.

“The economy is therefore likely to return to a significantly higher level of performance from spring onwards and resume its recovery course.”

It said there was no evidence to suggest economic activity would drop back down to its lowest point it reached during the lockdown last spring.

Clemens Fuest, president of the IFO institute for economic research, said: “The German economy is robust despite lockdowns, mainly because of the strong industrial activity.”

The IFO’s business climate index rose by 2.1 points to 92.4 points for February – the highest level since October.

Businesses across all economic sectors rated their current situation as better as well as their future prospects.

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Investor morale in Germany also surged in February on expectations consumption will take off in the coming months, according to the ZEW economic research institute.

Earlier this month, industrial conglomerate Thyssenkrupp raised its full-year outlook for the first time in nearly four years, and CEO Martina Merz said: “we’re noticing signs of an economic recovery”.

The government last month slashed its GDP growth forecast to 3 percent this year, a sharp revision from last autumn’s estimate of 4.4 percent.

This means the economy will probably not reach its pre-pandemic level before mid-2022.

(Additional reporting by Monika Pallenberg)

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