German industrial output fall points to weak quarter, economists say

Industrial production decreased by 0.3% compared with the previous month, Germany's federal statistics office said on Thursday.

Analysts polled by Reuters had predicted a 0.7% rise.

"Data released today underline that Germany's manufacturing sector was subdued even before the Iran conflict," said Andrew Kennigham, chief Europe economist at Capital Economics.

Kennigham expects the sector to remain weak ⁠this year, although it is not likely to suffer anything like the big declines seen during the last energy crisis that began in 2022.

The less volatile three-month on three-month comparison showed that production was 0.4% lower in the period from December to February than in the previous three months.

On track for contraction even without conflict

February's data shows that even without the Iran conflict, the German economy was on track for yet another quarter of contraction, said Carsten Brzeski, global head of macro at ING.

"As much as we were hoping to finally comment on some good economic news from Germany, it is a bit like waiting for a German train these days: definitely delayed and uncertain ‌whether ⁠it will ever arrive," Brzeski said.

Orders rose 0.9% on a seasonally and calendar-adjusted basis, official data showed on Wednesday.

Recent trends in new factory orders offer little hope that the economy will soon receive significant additional momentum from the industrial sector, said Ralph Solveen, senior economist at Commerzbank, forecasting the overall economy is likely to have grown only marginally in the first quarter.

Exports on the rise

German exports rose by 3.6% compared with the previous month, data from the federal statistics office showed, posting the biggest increase since May 2022. This compared with a forecast for a 1% increase in a Reuters poll.

 Imports rose by 4.7% on the month ⁠on a calendar and seasonally adjusted basis.

As a result, Germany's foreign trade balance narrowed to a surplus of 19.8 billion euros ($23.09 billion) in February, from a surplus of 20.3 billion euros in January.

Exports to European Union countries rose ⁠by 5.8% on the month and exports to countries outside the EU increased by 0.8%.

With the tariffs imposed by the U.S., exports to Germany's main export destination fell by 7.5% on the month.

($1 = 0.8576 euros)