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Industrial production slumps - but a turnaround in sight

2020-06-08T21:52:08.748Z

The corona crisis is slowing down German companies. Production has dropped to a low. Is it going up again?



The corona crisis is slowing down German companies. Production has dropped to a low. Is it going up again?

Wiesbaden / Frankfurt (dpa) - The slump in production in German industry has intensified again - but now the turnaround could gradually begin.

The Federal Ministry of Economics stated that the economic low had been reached. "With the gradual easing of protective measures and the resumption of production in the automotive industry, the economic recovery is beginning."

However, due to the Corona crisis, many companies expect production to decline in the next three months, as a survey by the Ifo Institute showed. After all, the slump is likely to weaken significantly. In May, the Ifo index on production expectations rose to minus 20.4 points after minus 51.0 points in April, the Munich research institute said. This was the largest increase in May since the previous month since reunification. "But that only means that the dive is now flatter," said Ifo expert Klaus Wohlrabe.

From March to April, manufacturing in the manufacturing sector dropped 17.9 percent month-on-month, compared to the same month in the previous year the decrease was 25.3 percent, according to the Federal Statistical Office. This is the largest decline since the beginning of the 1991 series, the Wiesbaden authority said. From February to March 2020, production had decreased by 8.9 percent, according to revised figures.

"The whole drama of the corona pandemic is now coming to light. The artificial coma of the German economy is now having a massive negative impact on economic data for April," commented VP Bank chief economist Thomas Gitzel. "But it is also clear that if the German economy starts up again, the figures will be correspondingly positive."

Commerzbank economist Ralph Solveen is also convinced that production "increased noticeably" already in May. After all, a considerable part of the decline in April is the result of the extensive halt to production in the automotive industry. According to the Federal Office, production in the industry slumped 74.6 percent on the previous month. There was only a 4.1 percent drop in construction.

Overall, industrial production in Germany has been as low as it has been for more than 20 years, said economic expert Nils Jannen from the Kiel Institute for the World Economy (IfW). The recovery will "take significantly more time than the crash". Jannen predicted: "In addition, the global investment climate is likely to remain rough for the foreseeable future, as uncertainty about the future economic impact of the Corona pandemic remains high and the equity base of many companies has been significantly weakened by the recent slump in sales." This will probably continue to make the German economy, which specializes in the production of capital goods, difficult for some time to come.

The number of bankruptcies in Germany has not yet exploded despite the economic downturn caused by the Corona crisis. In the first three months, with 4683 cases, 3.7 percent fewer companies went bankrupt than a year earlier. According to the Federal Statistical Office, there were most bankruptcies in trade, including the automotive industry, with 788 cases. Because there were more major cases, the creditors' claims were around 7.3 billion euros higher than in the same period last year (4.7 billion euros).

The number of regular insolvency proceedings opened in Germany decreased in May as in April. Compared to the same month in the previous year, the number fell by 14.9 percent in May. However, the legislature has temporarily released companies that become insolvent due to the Corona crisis from the obligation to file for bankruptcy. A number of economists anticipate a noticeable increase in bankruptcies for the year as a whole.

Source: merkur

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