Sharp Decline in German Industrial Production Raises Recession Worries

German industrial production fell by 2.4% in July, with weak activity in the automotive sector driving the decline. Analysts fear Europe's largest economy might contract again in the third quarter. The ongoing recessionary trends, highlighted by shrinking trade surplus and weakening industry, raise economic concerns.

German industrial production fell more than anticipated in July, driven by a significant slowdown in the automotive sector, triggering concerns of another contraction for Europe's largest economy in the third quarter. The federal statistics office reported a 2.4% decline compared to the previous month, exceeding analysts' forecast of a 0.3% fall.

"Friday's data is a cold shower for everyone hoping for a speedy recovery," said Carsten Brzeski, ING's global head of macro. Commerzbank's senior economist Ralph Solveen echoed this sentiment, noting that current indicators predict no rapid turnaround.

The automotive industry saw an 8.1% production drop, negatively impacting the overall result. In contrast, automotive production had risen by 7.9% in June. On a three-month comparison, production from May to July fell 2.7% compared to the February-April period. Analysts attribute this to broader industrial weakness and affirm that these trends suggest continued economic stagnation.

(With inputs from agencies.)