Bad times for the Mittelstand: German industrial production falls 0.5%

Germany's manufacturing sector may be the envy of the world, but a well-oiled machine it is not.

by Emma Haslett
Last Updated: 15 Aug 2014

Zum Teufel, as they say auf Deutsch: the jewel in Germany's crown is sparkling a little less than usual, after figures out today showed industrial production unexpectedly dropped 0.5% year-on-year. That's against expectations of a 0.3% increase. Awkward.

It's particularly bad news considering that as recently as January, the sector was growing 5%. Part of this is presumably to do with worries over the Russia/Ukraine crisis. It certainly doesn't help that Vladimir Putin has just announced a ban on food imports from Europe...

Industrial production (which measures manufacturing, mining and utilities) isn't the only figure showing a decline: yesterday, figures showed factory orders - another indicator of the health of the manufacturing sector - fell 3.2% in July from June, against expectations of a 0.9% gain. If you're counting, that's the figure's fastest fall since September 2011.

Considering manufacturing makes up 22% of Germany's GDP, according to data by the World Bank, that's a worry: particularly for its much-loved Mittelstand, the 'backbone' of medium-sized family-owned businesses that make up a big chunk of the sector.

Is it a sign Germany's future is bleak? Probably not: the country has recovered from blips like this in the past, most notably in 2003 and 2004. But the news comes just a day after Italy admitted it had fallen back into recession (it's triple-dip now). And with the fortunes of the two countries so closely tied, Germany is definitely not immune.

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