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Germany heads into recession as Putin’s war hits factory production Business

Germany may already be slipping into recession after its industrial activity plummeted following the Russian invasion of Ukraine.

Industrial production in Europe’s biggest economy plunged 3.9% in March, a fall three times bigger than economists had expected, leaving GDP 7.6% below its level. before the pandemic.

This shows the severe impact of the war on Germany’s vital manufacturing sector, even before the European Union tried to push through a ban on Russian energy imports.

Andrew Kenningham of Capital Economics said the figures showed the conflict was “hitting hard”.

“This is probably the start of a deep downturn in industry which we believe will push the entire German economy into recession,” he said.

A serious drag came from the automotive sector, with vehicle production down 14% in the month to 63% of its pre-pandemic level.

The war inflicted a new supply shock on automakers, which faced shortages of wiring supplies from Ukraine in addition to the prolonged shortage of semiconductors. Speaking earlier this week, Volkswagen chief executive Herbert Diess said the dispute was causing “unprecedented challenges”.

“Furthermore, massive increases in electricity and gas prices have pushed energy-intensive chemical and metallurgical companies to the brink and a drop in export demand, especially from outside the zone. euro, didn’t help,” Mr Kenningham added.

More recent business surveys suggest the slowdown worsened in April, with PMI data pointing to a continued slowdown. Confidence in the sector is at its lowest since May 2020.

Manufacturers have warned of worsening delays and cost pressures nearing record highs set last year. Orders fell for the first time since mid-2020, with companies blaming war, economic sanctions on Russia and spillovers from lockdowns in China.

Companies have tried to protect themselves against component delivery delays by stockpiling essential goods.

ING’s Carsten Brzeski said the data showed growing supply chain issues predicting a contraction in the second quarter.

He added, “The three pillars of Germany’s successful economic business model, exports, industry and energy, have become Germany’s Achilles’ heel.”

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Source: www.telegraph.co.uk
This notice was published: 2022-05-06 09:09:02

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