Industrial production in Germany fell unexpectedly in May, adding to signs that the manufacturing sector in Europe’s largest economy will not recover in the coming months.
The Federal Statistics Office said on Friday that industrial production fell in May by 2.5% compared to the previous month, contrary to analysts’ expectations in a Reuters poll that concluded with a 0.2% increase.
The office revised its data for April to rise 0.1% on a monthly basis instead of declining 0.1%.
A quarterly comparison showed that production in the period from March to May remained stable compared to the previous three months.
Data released on Thursday showed that factory orders in Germany fell 1.6% in May compared to April, marking their fifth consecutive decline.
“The sharp decline in industrial production shows that there is no rapid or significant recovery in sight for the economy,” said Jörg Krämer, chief economist at Commerzbank. After a stagnant economic performance in the second quarter of this year, only a muted upturn is expected, he said.
Germany plans €44 billion in new debt
Meanwhile, the German government plans to borrow 44 billion euros next year.
Finance Minister Christian Lindner said in Berlin on Friday that the new borrowing would be done as part of the debt brake.
Lindner said that next year’s budget includes expenditures worth 481 billion euros, including 57 billion euros in investments, stressing that next year’s budget is not austerity “at all.”
The German minister explained that the budget plan was carefully scrutinized to reveal areas for reducing expenses.
Lindner said the planned supplementary budget for 2024 would increase net borrowing under the debt brake to 50.5 billion euros, meaning no financial reserves for 2025.
Long negotiations
After long negotiations, the leaders of Germany’s ruling coalition agreed on the 2025 general budget and a growth package, according to the German News Agency.
The agreement on the general budget for 2025 and the financial plan until 2028 stipulates a commitment to curb debt.
The agency learned from government sources that no emergency situation has been identified that would require the suspension of the debt brake.
Some ministries, such as Foreign Affairs or Development, opposed the Finance Minister’s austerity goals, in light of Germany’s international commitments.
Germany is expected to achieve limited economic growth this year, as companies refrain from investing and private consumption continues to decline.
Business associations have long complained about Germany’s shortcomings as an economic location, such as high taxes and fees, a lack of skilled workers, and too much bureaucracy.
