Disrupted supply chains, falling demand and production: The corona crisis is weighing on German industry. But there are also bright spots.
Frankfurt / Main (dpa) - The corona crisis is leaving ever deeper marks in the German economy. Industrial production slumped in March, with machine builders receiving fewer orders.
Production in manufacturing dropped by 9.2 percent in February, as the Federal Statistical Office announced in Wiesbaden on Thursday. This is the largest decline since the beginning of the time series in January 1991. Compared to March 2019, the slump was even stronger at 11.6 percent.
The German mechanical engineering company reached the crisis at the end of the first quarter. According to the VDMA industry association, incoming orders fell in March by 9 percent compared to the same period in the previous year, adjusted for price increases (real). There was a clear drop of 12 percent in international orders. "This suggests that the spread of the pandemic will first be felt in China and later in Europe," said VDMA chief economist Ralph Wiechers. Domestic orders only decreased by 2 percent.
Wiechers assumes that the "full force of the crisis" in mechanical engineering will only become apparent in the coming months. After a relatively good start to 2020, the corona pandemic undermines the confidence of the key export-oriented industry. "At the beginning of the year, we were still hopeful for a better course of the year, as the leading indicators had indicated," said Wiechers.
Orders fell by only 2 percent in the first quarter as a whole, and domestic demand even increased by 1 percent. By contrast, orders from abroad decreased by 4 percent. International trade conflicts had already burdened the industry with more than one million employees last year.
In addition to supply chain disruptions, mechanical engineering companies have recently complained of lower demand, according to VDMA surveys. If companies receive fewer orders and lack important products for manufacturing, they shut down production.
In March, the automotive industry in particular pulled industrial production down in Germany, falling by almost a third compared to the previous month. Production also declined by double-digit percentages in the printing and clothing industry as well as in pharmaceuticals and capital goods. Only in the construction industry was there a slight plus, according to the statisticians.
"Production should drop significantly again in April, before the recovery will begin in May," analyzed Commerzbank economist Ralph Solveen. The economists at VP Bank are also convinced: "The easing measures and the start-up of production in the large German automobile factories promise (...) improvement. Industrial production will move up in May."
So far, however, many companies have apparently been able to withstand the crisis. According to a survey by the Leibniz Institute for Economic Research Halle (IWH), the number of bankruptcies in Germany in March and April 2020 remained at the previous year's level. Accordingly, as in the two previous months, a total of 1936 partnerships and corporations filed for bankruptcy.
However, IWH expert Steffen Müller sees no reason to give the all-clear: "On the one hand, many companies have reserves and do not immediately report bankruptcy when a crisis breaks out." On the other hand, government measures may have helped to at least postpone a wave of bankruptcies. The IWH evaluated the current bankruptcy announcements of the German courts.
VDMA notices
Federal Office for Industrial Production 03/2020
