Industrial Production Collapses in Germany

The German economy continues to send bad signals: after a fall in exports, worrying data now also concerns industrial production, which contracted by 1.6% in real terms in December 2023 (month-on-month), while falling by 3% compared to the same month in 2022.

This was stated by the Federal Statistical Office (Destatis), which also reports quarterly data showing a 1.8% contraction between October and December compared to the previous period.

Annual data for 2023 show that German industrial production is 1.5% lower than in 2022, with the decline concentrated particularly in the high-energy-intensive sectors (–7.6%), as well as in energy production and construction (–3.4%).

Export data published earlier showed a 4.6% decline in December 2023, worse than the 2% expected decline, while for the entire year 2023 Germany exported €1,562.1 billion worth of goods (–1.4% y-o-y).

To revitalize the economy, (Green) Minister Robert Habeck is thinking of creating an off-budget fund to reduce taxes on business. “Business taxation is no longer internationally competitive and does not encourage investment,” Habeck explained, according to Italian economic newspaper Il Sole 24 Ore. A proposal that will, however, have to deal with the intransigence of the finance minister, Liberal Christian Lindner, who does not want to create new debt. According to the Milan financial newspaper, we are in for a “new Habeck-Lindner duel” that will only further destabilize the fragile government of Olaf Scholz.