ECONOMY
German industrial production slumps on supply chain disruption

BERLIN (Reuters) -German industrial output dropped by far more than expected in August due to supply chain disruptions that are holding back growth in Europe’s biggest economy and hitting the auto sector particularly hard, official data showed on Thursday.

The Federal Statistics Office said industrial output fell by 4.0% on the month after an increase of 1.3% in July. A Reuters poll had pointed to a decline in August of 0.4%.

“Manufacturers continue to report production constraints due to supply shortages of intermediate products,” the Office said in a statement.

Production of cars and car parts fell by 17.5% on the month.

German car companies are struggling to meet a post-pandemic surge in demand since the start of the year due to a lack of microchips and other intermediate products.

Official data released on Wednesday showed German industrial orders fell more than expected in August on weaker demand from abroad following two months of unusually strong gains due to major contracts.

However, the Munich-based Ifo economic institute said separately that its survey of production expectations rose in September.

“Order books are still full, only materials bottlenecks are causing problems at the moment and dampening production plans somewhat,” Ifo economist Klaus Wohlrabe said.

Thomas Gitzel, economist at VP Bank, added that “if the flow of materials gets going again, the conditions are in place for a strong upturn in industrial activity.”

(Reporting by Paul Carrel and Klaus Lauer; Editing by Riham Alkousaa and Maria Sheahan)

Source: Reuters.com

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