German industrial output sees largest drop in a year

German industry has experienced one of its most significant declines in the last year.

German industrial production fell by 1.9% in June compared to the previous month, influenced by the machinery and equipment, pharmaceutical, and food sectors. This decline was much larger than economists had forecast.

The statistics agency Destatis announced on Thursday that May’s figures were revised to show a slight contraction, bringing the total decline in the second quarter to 1%.

The report added to the signs of distress from Germany’s export-oriented businesses, as tariffs threatened by the US administration became a reality.

Porsche and Audi were among the car manufacturers that lowered their expectations, while others pointed to supply shortages that could negatively affect growth.

The statistics office explained that the “unusually high revision” in May was due to corrections in data from automakers.

According to separate data released on Wednesday, weak demand from countries outside the 20-nation Eurozone caused an unexpected drop in factory orders in June, with few signs of a near-term recovery.

The Bundesbank predicts the economy will stagnate in 2025, following a prolonged recession that occurred for much of the previous two years.

However, there are some positive signs. Confidence is slowly increasing with the investment plans of some of Germany’s leading companies and expectations of significant increases in public spending on infrastructure and defense.

This situation should also support long-term growth. Economists forecast 1.1% growth next year, with this figure expected to rise to 1.6% in 2027.

According to a separate report, Germany’s trade balance fell to €14.9 billion ($17.4 billion) as imports increased, marking its lowest level in eight months.