German industrial production plummeting amid high energy costs

By Al Mayadeen English
Source: Agencies
7 Sep 2022 18:18

Official figures on the manufacturing sector, the pillar of the German economy, are causing concerns over the coming of a possible recession in the near future.

Rainer Jopp makes the final check of an e-Golf electric car in the so-called light tunnel during the official production start in the German car manufacturer Volkswagen Transparent Factory (Glaeserne Manufaktur) in Dresden, eastern Germany, Monday, April 3, 2017 (AP Photo/Jens Meyer)

A drop has been found in German industrial production during the month of July, according to official figures published in a report by the federal statistics agency Destatis on Friday, with a sharper downturn for energy-intensive sectors where the costs of production have soared.

According to the report, the German manufacturing industry produced 0.3 percent less in July compared with the previous month, after a comparable 0.8 percent rise in June.

Since the war in Ukraine began, the sanctions imposed on Russia have caused more harm to EU economies, including Germany's economy.

In energy-intensive industries, such as chemicals or metals, production fell more sharply, dropping by 1.9 percent in July and by almost seven percent since February.

"Sharply rising energy prices pose a serious problem for industry," said Siegfried Russwurm, head of the influential BDI industry lobby.

A €65 billion ($64 billion) inflation-relief package announced "helps companies too little", Russwurm said, calling on the government to design a further set of measures specifically for industry.

The report also mentions that industrial production was similarly down 1.1 percent in the year to July.

Disruptions in the supply chain are blamed on the COVID-19 as well as the Russia-Ukraine conflict.

Russia halting of its Nord Stream 1 gas pipeline last week has sparked concerns all over Europe regarding energy prices as manufacturing has taken a hit all over the continent, especially in the UK.

Previously, Gazprom said gas would continue to flow on Saturday after a different turbine repair was required. However, Western sanctions have made it difficult for the energy company to pursue its maintenance routine.

Thirteen EU nations have either ceased getting Russian gas entirely or are only receiving a portion of it due to the temporary blockage of the Nord Stream pipeline 1, the Russian TASS news agency reported last week.

The dwindling of gas supplies and the soaring cost of energy have stoked fears Germany could fall into recession over the winter season.