German Industrial Production Stagnates on Virus Restrictions

German industrial production failed to grow for the first time in eight months in December, adding to signs that the economy is being weakened by the second wave of the coronavirus pandemic.

Output stagnated at the end of last year as gains in manufacturing were offset by weaker construction. Economists had expected a 0.3% gain.

German Industrial Production Stagnates on Virus Restrictions

“The outlook for the industrial sector continues to be subdued in light of the pandemic and the latest bottlenecks in the semiconductor industry,” the Economy Ministry said in a statement. “This is also suggested by weaker orders and damped sentiment among businesses.”

While German industry has held up relatively well in recent months, it’s starting to show a greater impact from the latest curbs on activity in the country and major export markets. Factory orders fell for the first time in eight months in December, damped in part by lower demand from the euro area.

What Bloomberg Economics Says

“Momentum appears to be fading a little in Germany’s industrial sector, following a period of rapid catch up toward pre-crisis production levels. It is unlikely that manufacturing will buoy the economy to the same extent in early 2021 as it did in 4Q 2020.”

-Jamie Rush. To read the full report, click here

Germany is keeping restaurants, bars and non-essential shops closed until at least the middle of February, putting the economy on track for a contraction in the first quarter of the year. The government last week agreed to further support companies and citizens hit by the fallout from the pandemic.

Industrial output declined 8.5% in 2020, the ministry said.

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