Companies surprise with strong production growth

Tiguan production at Volkswagen in Wolfsburg

As more chips are available again, more cars can be produced.


Berlin Thanks to increased orders and reduced supply bottlenecks, German companies increased their production for the second month in a row in February. Industry, construction and energy suppliers together produced 2.0 percent more than in the previous month, the Federal Statistics Office announced on Thursday.

Economists polled by Reuters expected only a minimal gain of 0.1 percent. January saw the strongest growth since mid-2020 – 3.7 percent.

With exports and industrial orders already up, the long-feared recession at the start of the year is becoming less likely. “After a sharp January, another big increase is fantastic,” commented Hauck Aufhäuser Lampe Privatbank Chief Economist Alexander Krueger. “It looks like the industry has turned a corner.”

Here’s what economists say about production growth

Although service providers continue to be reeling from customers suffering from high inflation, there are now even signs of “significant growth” in gross domestic product in the first quarter that just ended, according to Commerzbank. “However, this should only be an interim high,” Commerzbank economist Ralf Solven said.

“Because in the second half of the year, global interest rate hikes by central banks are likely to have an increasing impact.” Leading economic research institutes expect growth of 0.1 percent in January-March after minus 0.4 percent in the fourth quarter.

“from below”

Only industry produced 2.4 percent more in February than in the previous month. “A particularly large share in the significant increase in the total volume of production was brought by the automobile industry,” the statistical office emphasized.

steel industry

Germany’s largest industrial sector increased production by 7.6 percent compared to January.

(Photo: dpa)

Germany’s largest industrial sector increased production by 7.6 percent compared to January. Production also increased in energy-intensive industries — by 1.9 percent. This indicates that “the energy crisis may have bottomed out,” the Federal Ministry of Economy emphasized. A 1.5 percent increase was noted in the construction industry. Energy suppliers, on the other hand, reduced production by 1.1 percent.

Orders in the industry in February increased stronger than in the last year and a half. New business was up 4.8 percent month-on-month for the third consecutive month.

At the same time, material bottlenecks in industry are increasingly disappearing. In March, 41.6 percent of companies still reported problems, after 45.4 percent in February, the Ifo Institute found.

This is the sixth consecutive decline and the lowest value in about two years. By comparison, in March 2022, the share was still more than 80 percent. “This drop will have a positive impact on industrial production in the coming months,” said Klaus Wohlrabe, head of research at Ifo.

more: The German economy is stuck in decline

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