German industrial output falls more than estimated

Industrial production in Germany declined by 2.4% month-over-month in December 2024, reversing the downwardly revised 1.3% growth observed in the previous month and surpassing market forecasts of a 0.6% drop.

German industrial output falls more than estimated

This marks the steepest decrease in industrial output since July, signaling a sharp slowdown in production activity. The decline was primarily driven by a significant contraction in the automotive industry, where output plummeted by 10.0%. Additionally, production in the machine maintenance and assembly sector saw a notable drop of 10.5%, reflecting reduced industrial activity and potential supply chain disruptions.

Pharma shows strong resilience

By contrast, the pharmaceutical industry showed strong resilience, with production rising by 11.6%, the most significant growth among sectors. This increase highlights the ongoing strength of sectors related to health and pharmaceuticals, which have seen sustained demand throughout 2024. However, despite some bright spots, broader industrial production contracted across other key sectors. Production of capital goods, which includes machinery and equipment, fell by 4.7%, and intermediate goods, which are essential for further manufacturing processes, saw a 3.3% decline. Consumer goods, on the other hand, bucked the negative trend with a modest 0.9% increase in production, offering some support to the overall industrial sector. Meanwhile, energy-intensive industrial branches, which include industries like chemicals and metals, saw a 3.1% decline, likely due to rising energy prices and increased costs for these sectors, which rely heavily on energy inputs.

QoQ figures

Looking at a less volatile, three-month-on-three-month basis, production dropped by 0.9% from October to December compared to the prior three months, further emphasizing a weakening industrial trend toward the end of the year. On an annual basis, industrial production shrank by 3.1% in December, accelerating from the prior 2.8% fall in November, underscoring a deepening contraction in industrial activity. This broader decline in Germany's industrial output suggests that the country’s manufacturing sector is facing significant challenges, including ongoing supply chain disruptions, high energy prices, and weakening demand from key global markets. As Europe’s largest economy, the slowdown in Germany’s industrial sector could have broader implications for the region’s economic growth outlook heading into 2025.