German industrial production fell more than predicted in March due to a steep drop in auto manufacture, according to official statistics released Monday, fueling fears that Europe’s largest economy is heading for a harsh downturn.
Seasonally adjusted estimates from the federal statistics agency Destatis indicated that output fell 3.4 percent from the previous month.
It follows two months of robust growth in January and February, and it was worse than the 1% decrease predicted by economists polled by financial data firm FactSet.
The announcement follows data released last week that revealed an unexpected drop in new orders at German companies, as the country’s large industrial sector gets battered by high energy prices as a result of Russia’s invasion of Ukraine.
While expectations were building that Germany would avoid a recession, the newest round of dismal data has fueled fears of a recession.
“After production in the industrial sector developed dynamically at the beginning of the year the beginning of the year, there was an unexpectedly sharp decline in March,” the economy ministry said in a statement.
The automobile industry was a key contributor to the March dip, with car and part production plummeting 6.5 percent.
In February, the increase was 6.9 percent. Volkswagen, BMW, and Mercedes-Benz are all based in Germany, and the auto industry is an important part of the country’s economy.
There were also significant decreases in the manufacture of machinery and equipment, as well as construction production.
“More bad news from Germany industry,” said LBBW bank analyst Elmar Voelker.
The figures “underline that the dangers of recession have by no means been averted,” he said.
However the economy ministry insisted business sentiment had been improving recently, which “points to an economic recovery in the course of the year”.
After contracting at the end of 2022, the German economy dodged a recession in the first quarter of this year, registering flat growth.
The German government has forecast growth of 0.4 percent for the whole of 2023.
