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08 Mar 2021 | 08:18

German industrial production unexpectedly falls in January

(Sharecast News) - German industrial production unexpectedly fell in January, according to figures released on Monday by Destatis. Industrial production declined 2.5% on the month following a 1.9% increase in December 2020, missing expectations for a 0.2% rise. On the year, production fell 3.9% following a 1% decline in December.

Compared with February 2020, the month before Covid-related restrictions were imposed, production in January 2021 was 4.2% lower.

Production in industry excluding energy and construction fell 0.5%. Within industry, the production of capital goods was down 0.8% and the production of consumer goods declined 3%. Output of intermediate goods was 0.7% lower.

Outside industry, energy production rose 0.6% in January, while construction output declined 12.2% against the background of the strong increase recorded in December and the end of the VAT reduction.

Capital Economics said the sharp decline in German industrial production in January was largely due to a slump in construction and some supply chain difficulties, which should prove temporary.

"Nonetheless, the poor January number is another reason to think that aggregate GDP will contract, perhaps quite sharply, in Q1," said chief Europe economist Andrew Kenningham.

"With Covid-19 restrictions having been extended until the end of March, and potentially running for longer, overall economic activity will remain subdued for some time. There should be a sustained recovery from the second quarter, however, provided that the vaccination programme gathers pace," he added.

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