German Manufacturing Output Weakened in March

May 11, 2015Germanyby EW News Desk Team

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German manufacturing fell 0.8 percent in March compared to February, and output amended at seasonal and inflationary levels amounted to a 0.5-percent fall in March, according to a report from Germany's Economy Ministry. Experts believe the fall is attributed to weakness in the world economy, including the fallout between Greece and European lenders.

Germany has been one of the few nations in Europe that has remained above economic turmoil, but no country can escape the interconnectedness of the world economy. Germany's manufacturing sector is crucial because it is the leading reason why Germans have lived under a thriving economy. However, industrial production declined due to lower demand from other Eurozone nations affected by slow growth. Factory orders increased in March after two months of stagnation, but overall orders fell 1.5 percent in the first quarter, stemming from weak demand within Europe. Outside of Europe, Germans worry about China's growth potential and whether the U.S. economy will continue to expand. Russia is another nation crucial to Germany's growth rate, and even though the two nations are at geopolitical odds over the Ukraine situation, both countries share strong economic ties.

Internally, Germany is also undergoing an investment decline that contributes to the stagnation in manufacturing growth. Investment goods dropped 1.4 percent in March, and analysts indicate that factory output in April could follow a similar decline. Two of Germany's most important sectors, auto manufacturing and engineering suffered a dip in output. Further, imports rose by 2.4 percent in March, while German exports only went up 1.2 percent.

Germany may be going through a rough patch, but the overall state of the economy looks good in the near future. First, construction rose by 2.3 percent, boosting Germany's overall economy. Consumer spending remains strong and consumer confidence is at its highest levels since 2001. Even though investor interest waned somewhat, Germany's investment levels have surged in the past year, and business confidence is at an all-time high.

German manufacturers will also get a boost from increased growth within the European Union. Many EU countries are struggling economically, but there are some nations undergoing periods of growth, which will be a positive addition to Germany's economy. Germany expects to grow 1.9 percent in 2015 and 2.0 percent in 2016, while the Eurozone expects to grow 1.5 percent in 2015, an uptick from a 1.3-percent forecast in February. Germany's first quarter growth report will be introduced to the public on May 13, and economists expect a growth rate of 0.5 percent, which is lower when compared to 0.7 percent from 2014.

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