German industrial production falls more than expected in July

German industrial production fell much more than expected in July, according to data released on Friday by Destatis.

Production declined by 2.4% on the month, having risen 1.7% in June, and versus expectations for a 0.3% decline.

On the year, industrial production fell 5.3% in July following a 3.7% decline the month before.

Destatis said production declined in most sectors of manufacturing, although the drop in the automotive industry had a particularly negative impact on overall performance, down 8.1% month-on-month following growth of 7.9% in June.

Franziska Palmas, senior Europe economist at Capital Economics, said: "The big drop in German industrial production in July adds to the sense that the sector is facing a deep crisis and that, having contracted in Q2, the German economy may fall back into a technical recession in Q3."

Carsten Brzeski, global head of macro at ING, said: "Today’s data is a cold shower for everyone hoping for a speedy recovery. In fact, it suggests that the bottoming out of industry still has a long way to go. We've already got weak sentiment indicators, and the risk of yet another quarter of stagnation or even contraction has clearly increased."