German economy faces uphill climb as industrial output falls

BERLIN (Reuters) – A swift economic recovery for Germany appeared less likely on Friday as data showed a surprise fall in industrial production.

Output fell by 0.2% in May compared with the previous month, the federal statistical office said. Analysts polled by Reuters had predicted that output would stagnate.

Carsten Brzeski, chief economist at ING, pointed to a “toxic combination” of poor outlook, thin order books and the need to build up inventories further, as well as structural factors such as the war in Ukraine and the transition towards cleaner energy.

“The country’s international competitiveness has already deteriorated in recent years and is likely to deteriorate further,” Brzeski said.

The industrial production data was a reminder of the uphill climb in Europe’s biggest economy if it is to shake off recession, after a surprise increase in May orders fuelled some optimism on Thursday.

After yesterday’s very good figures on incoming orders, today we are again faced with disillusionment,” said Jens-Oliver Niklasch of LBBW bank.

“We may just see stagnation in the second quarter, but much more likely a renewed decline in economic output,” he added.

The office offers a breakdown of the data on industrial production on its website.

(Reporting by Anna Mackenzie and Rene Wagner, Writing by Rachel More, Editing by Miranda Murray)