Industrial production in Germany dropped 1.3% month-over-month in February 2025, following a 2% increase in January, which was more than market expectations of a 1.1% decline. The sharp decline in February marked a reversal in the previous month’s positive momentum, highlighting ongoing volatility in Germany’s industrial sector.
German industrial output falls more than expected
The decrease was largely driven by a significant 3.2% drop in the construction industry, reflecting weaker demand and possibly disruptions in building projects, which could be tied to broader macroeconomic challenges such as higher borrowing costs and global supply chain issues. Additionally, output in the food industry contracted by 5.3%, a sharp decline that points to reduced manufacturing activity, possibly due to supply shortages or decreased domestic and international demand for food products.
Energy production also faced challenges, dropping by 3.3%, which is indicative of ongoing instability in the energy market. This decrease could be linked to lower energy demand, possibly driven by warmer-than-usual winter weather or reduced industrial consumption due to global economic uncertainties. The energy sector has been under pressure recently, as the transition to cleaner sources of energy and global energy supply disruptions continue to affect output levels.
Positive contribution from electrical equipment
In contrast, there was a positive contribution from the manufacturing of electrical equipment, which increased by 3.3%. This gain suggests that certain sectors, such as technology and electrical machinery, are still performing well and benefiting from strong global demand. The rise in electrical equipment production might indicate a sustained need for automation and technology-driven infrastructure, particularly in industries like renewable energy, automotive, and telecommunications.
Meanwhile, production in energy-intensive industries, which includes sectors such as chemicals and metals, fell by 0.6%. This slight decrease highlights the ongoing strain on industries that heavily rely on energy inputs, especially given the higher energy costs and regulatory changes that have affected Europe’s manufacturing landscape.
Industrial output declined in three months
Looking at the less volatile three-month-on-three-month comparison, industrial output declined by 0.1% from December 2024 to February 2025. This slower, but still negative, trend points to a stagnation in industrial activity and reflects broader uncertainties in the global economy. The relatively mild decline over this period suggests that, while some sectors are facing headwinds, others are holding steady, and the overall industrial slowdown is more gradual.
On a yearly basis, industrial activity in Germany fell by 4% in February 2025, following a 1.6% drop in January. This larger annual decline underscores the challenges facing the sector over a longer period, driven by weak global demand, the ongoing energy crisis, and continued disruptions in international trade. The fall in industrial production is a concerning signal, particularly as Germany remains one of Europe’s largest industrial producers, and any sustained slowdown could have broader implications for the continent’s economic growth. As the German economy grapples with these challenges, analysts will be closely monitoring the upcoming months to see if industrial output stabilizes or if further declines are in store.
