German Industry Production Disappointed Even Before Iran War

A steelworks in Germany. Photo by Alex Kraus /BloombergArticle content(Bloomberg) — German industrial production unexpectedly fell in February, casting doubt on a swift recovery in Europe’s largest economy even before the Iran war started.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentOutput dropped 0.3% from January, with construction and consumer goods driving the decline. Only three economists in a Bloomberg survey had predicted a contraction. Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentA separate report showed exports rose 3.6% in February and imports surged 4.7% — both exceeding economists’ estimates by far. Article contentArticle contentThe figures offer little reassurance that Europe’s largest economy will deliver on expectations of a meaningful rebound. While a ceasefire in the Middle East is feeding hope that a further escalation of the crisis can be avoided, higher energy costs and uncertainty about longer-term solutions weigh on confidence and prospects for growth.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentGermany’s leading research institutes forecast an expansion of just 0.6% this year, they said last week, less than half the pace expected just a few months ago. Article content“Recent surveys point to a slowdown in industrial activity in the second quarter amid heightened geopolitical uncertainty,” the Economy Ministry said in an emailed statement. “Future economic developments will therefore depend crucially on how the conflict in the Middle East unfolds.”Article contentChemical makers including BASF SE and Lanxess AG were among the first to warn about the implications of the war that kept a key route for oil and gas shipments — the Strait of Hormuz — closed for more than five weeks. Lufthansa flagged potential bottlenecks for jet fuel availability and readied plans that could involve grounding planes.Article contentArticle contentWhat Bloomberg Economics Says…Article content“Before the Iran war, we expected a modest upturn in the first half of the year, with higher government spending adding momentum in the second. Now, higher oil and gas prices are likely to weigh on energy-intensive sectors and indirectly affect autos and machinery manufacturing, derailing the industrial recovery.”Article content—Martin Ademmer, economist. For full React, click hereArticle contentWhether that will still be necessary will depend largely on the two-week truce agreed by the US and Iran holding and ultimately evolving into a more lasting peace.Article contentGerman Chancellor Friedrich Merz welcomed the agreement on Tuesday, encouraged negotiations to prevent a “severe global energy crisis” and said the country is prepared to contribute to guaranteeing free passage through the strait. Article contentA gauge measuring economic sentiment published Tuesday highlighted the stakes. A Sentix index for Germany plunged in April, with expectations now at the lowest level in one-and-a-half years.Article contentSome confidence still rests on an expansionary fiscal policy, with infrastructure and defense spending seen bolstering demand. In February, factory orders posted a weaker-than-anticipated 0.9% gain.Article content—With assistance from Harumi Ichikura, Kristian Siedenburg and Joel Rinneby.Article content(Updates with BE after seventh paragraph)Article contentTrending Doritos at US$7 a bag ended up costing PepsiCo billions Retail & Marketing BYD to open 20 car dealerships in Canada this year Autos Canadian pension plans are so healthy that employers are taking a contribution 'holiday,' says Mercer Retirement Subscriber only. 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