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Supply problems cause fall in German industrial output

german output

German industrial output unexpectedly fell again in June, data showed on Friday, suggesting recovery is slowing in Europe’s biggest economy, held back by supply bottlenecks for intermediate goods.

The Federal Statistics Office said industrial output dropped by 1.3 per cent on the month after a downwardly revised decline of 0.8 per cent in May. A Reuters poll had pointed to a rise of 0.5 per cent.

The fall was driven by a drop in the production of capital goods, such as machinery and vehicles, which fell 2.9 per cent, the data showed. Consumer goods output continued to grow, rising by 3.4 per cent.

Industrial production fell by 0.6 per cent in the quarter ending in June compared to the previous quarter, with the automotive industry reporting a drop of 11.2 per cent.

In addition to timber shortage impacting the construction industry, the economy ministry said the drop was due to semiconductor supply bottlenecks.

“The eagerly awaited semiconductors in Europe will continue to be a long time coming,” said Thomas Gitzel, an economist at VP bank said.

Earlier on Friday, an Ifo economic institute survey showed that German industry cut its production outlook in June due to the supply issues.

“Bottlenecks for important intermediate products are now making themselves felt,” Ifo economist Klaus Wohlrabe, the head of surveys at ifo, said

But the ministry and analysts remained cautiously optimistic about the overall outlook due to high demand and strong exports.

“If the flow of material starts up again, industrial production will be able to wipe out its gap,” Gitzel said.

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