German industrial production unexpectedly drops in September

German industrial production unexpectedly fell in September amid supply chain shortages, according to figures released on Friday by Destatis.

Industrial production was down 1.1% on the month following a revised 3.5% decline in August and versus expectations for a 1% increase. On the year, output fell 1% in September following a 2.2% rise the month before.

Compared with February 2020, the month before coronavirus restrictions were imposed in Germany, production was 9.5% lower.

The production of capital goods decreased by 2.8% and the production of intermediate goods by 1.1%. In the automotive and automotive parts manufacturing sector, production rose 2.1% after falling 18.9% in August. The production of consumer goods rose 0.2%.

Outside industry, energy production was 1% higher than in the previous month and construction output was up 1.1%.

Andrew Kenningham, chief Europe economist at Capital Economics, said there seems to be no light at the end of the tunnel for German industry.

"The automobile manufacturers association VDA reported that production in October was still 44% below its February 2020 level on a seasonally-adjusted basis. October’s Manufacturing Output PMI is consistent with zero industrial production growth.

"And an Ifo survey showed that 70% of manufacturing firms were struggling with component shortages. The problems are most acute in the auto sector, but electronics firms and others are also affected by lengthening delivery times, rising shipping costs and component shortages."