Risk of Germany falling back into recession "uncomfortably high" - ING

(Alliance News) - German industrial production continued to decline on a monthly and annual basis in August, official statistics revealed on Monday, fueling fears that Europe's largest economy is set to fall back into recession.

"Whether you call it de-industrialisation, industrial shrinking, or just a big disappointment, one thing is clear: German industrial production dropped once again in August for the fourth consecutive month," Dutch bank ING said.

According to Destatis, industrial production edged down 0.2% in August, after declining by 0.6% in July, which was revised from a 0.8% fall.

Over the month, construction and energy production fell by 2.4% and 6.6% respectively. Additionally, the manufacture of machinery and equipment fell 2.3%. However, automotive production climbed 7.6%, after falling 9.4% in July.

Annually, industrial production was 2.0% behind the levels of August 2022. In July, it was down 1.7% from the year before.

ING noted that industrial production still remains 7% below its pre-pandemic level, even over three years after the pandemic had started. It expects industrial production in Germany to move "sideways" rather than gaining momentum "anytime soon". This is in light of the still weak production expectations, thin order books and high inventories, ING explains.

The German economy had fallen into recession earlier this year, after two consecutive quarters of contraction at the end of 2022 and the beginning of 2023. This was followed by no economic growth in the second quarter.

"A stagnating economy in the second quarter after two quarters of contraction gave hope to some that the economy was improving," ING recalled, "However, hard data for July and August had nothing to be cheerful about."

"In fact, retail sales, exports and industrial production all disappointed in the first two months of the third quarter, suggesting that for the entire economy, the risk of falling back into contraction is uncomfortably high."

By Elizabeth Winter, Alliance News senior markets reporter

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