Companies produce more – Difficult year 2023 expected | news

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Berlin (Reuters) – Despite the recent slump in orders, German firms ramped up production in November.

Industry, construction and energy suppliers combined produced 0.2% more than in the previous month, the Federal Statistical Office announced on Monday. According to experts, unfinished orders that have been left behind in recent months due to supply bottlenecks are underpinning production. “In the coming months, the slow disappearance of material bottlenecks could further support the industrial economy,” hopes the Federal Ministry of Economics. In October, production fell by a revised 0.4 percent (previously: -0.1).

Regardless of the energy crisis, sharp price increases and high geopolitical uncertainties such as Russia’s war on Ukraine, economists do not expect a crisis anytime soon. “Industrial production has so far defied all problems because the easing of material bottlenecks allows companies to work with the very high order book,” said Jörg Kramer, chief economist at Commerzbank. “But in the long run, industrial production cannot ignore incoming orders, which have been declining since the spring”. Rising interest rates around the world would indicate a slight recession in the first half of the year.

Four out of ten companies in Germany expect a recession this year. Only a good quarter of companies rely on higher business activity and around 35% on stagnation, according to an employer survey of 2,500 companies by the German Institute of Economics (IW). Their commercial expectations have significantly dimmed. “A severe recession is expected in the construction sector and the pessimists also predominate in the industry,” said the IW. The worsening of production expectations for 2023 can be observed almost equally in all economic areas.

SHARP DECLINE IN CONSTRUCTION

The export-dependent industry recently suffered the steepest decline in orders in more than a year due to the weakening global economy: orders in November were 5.3% lower than the previous month. The lack of large orders has contributed to this, because many companies avoid higher expenses due to rising interest rates, the risk of recession and high energy costs. Claims in the sector for missing materials decreased in December for the third consecutive month: 50.7% of companies still suffered from them, after 59.3% in November, as noted by the Ifo Institute. “A few months ago, there were fears that industrial activity could collapse in view of an impending gas shortage,” said LBBW economist Jens-Oliver Niklasch. “It didn’t happen that way.” This demonstrates the remarkable flexibility of the sector, which has significantly contributed to the reduction of gas consumption.

Industry alone produced 0.5% more in November than the previous month. Manufacturers of capital goods such as cars and machines increased their output by 0.7%. In the case of consumer goods, on the other hand, it decreased by 1.5 percent and for intermediate goods it grew by 1.1 percent. The construction sector recorded a decline of 2.2%. Energy suppliers increased their production by 3.0%.

(Report by Rene Wagner and Klaus Lauer, edited by Hans Seidenstücker – If you have any questions, please contact our editorial team at [email protected])

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