Industrial production in Germany declined more than expected in March, official data showed Monday, driven partly by a heavy fall in car manufacturing, spurring again recession fears in Europe's largest economy.
Output decreased by 3.4% on the previous month following a slightly revised increase of 2.1% in February, the federal statistical office said on Monday.
It follows two strong months of growth in January and February, and was worse than the 1% decline forecast by analysts surveyed by financial data firm FactSet. In a Reuters poll, analysts had pointed to a 1.3% fall.
The news comes after data released last week showed a surprise plunge in new orders at German factories, as the country's vast industrial sector is battered by high energy prices following Russia's invasion of Ukraine.
While hopes had been growing that Germany could dodge a downturn, the latest batch of negative data has fuelled fears a recession may be on the cards.
"After a buoyant performance by industrial production at the beginning of the year, there was an unexpectedly sharp decline in March," the economics ministry said.
The automotive industry was a major contributor to the decline in March, with the manufacture of motor vehicles and automotive parts falling 6.5%.
That compared to a 6.9% increase in February. Germany is home to carmakers such as Volkswagen, BMW and Mercedes-Benz and the auto sector is a pillar of the country's industry.
Production in machinery and equipment fell by 3.4%, and output in the construction sector decreased by 4.6% versus the previous month.
In the first quarter, production was 2.5% higher than in the last quarter of 2022, according to the statistics office.
In March, German industrial orders fell by 10.7% from the previous month on a seasonally and calendar-adjusted basis, posting the largest month-over-month decline since 2020 at the height of the COVID-19 pandemic.
"German manufacturing is suffering more and more from the global rate hikes, which are increasingly applying the brakes on the economy," said Commerzbank's chief economist Ralph Solveen.
"The risks of a recession in Germany are rising."
Retail sales and exports also dropped sharply in March, increasing the odds of a downward revision to first quarter gross domestic product, ING's global head of macro Carsten Brzeski said.
"More bad news from Germany industry," said LBBW bank analyst Elmar Voelker.
The figures "underline that the dangers of recession have by no means been averted," he said.
Gross domestic product (GDP) was unchanged quarter-over-quarter in adjusted terms in the first three months, following a 0.5% contraction in the fourth quarter of 2022. A recession is defined as two consecutive quarters of contraction.
"A downward revision would mean the economy fell into recession after all," Brzeski said.
