High energy prices squeeze German industrial output

German industrial production fell slightly in July, official figures published Friday showed, with a sharper drop seen in energy-intensive sectors where input costs have soared.

The manufacturing sector, the pillar of the German economy, produced 0.3 percent less in July compared with the previous month, after a comparable 0.8 percent rise in June, the federal statistics agency Destatis said in a statement.

German industrial production has struggled since Russia’s invasion of Ukraine in February.

In energy-intensive industries, such as chemicals or metals, production fell more sharply, dropping by 1.9 percent in July and by almost seven percent since February.

“Sharply rising energy prices pose a serious problem for industry,” said Siegfried Russwurm, head of the influential BDI industry lobby.

A 65-billion-euro ($64-billion) inflation-relief package announced “helps companies too little”, Russwurm said, calling on the government to design a further set of measures specifically for industry.

Industrial production was similarly down 1.1 percent in the year to July, Destatis said.

Persistent supply chain disruptions in the wake of the coronavirus pandemic and the outbreak of the war in Ukraine continued to hold back production.

The worst could be yet to come for Germany after Russia failed to restart gas supplies following a planned stop to the Nord Stream 1 pipeline last week.

The dwindling of gas supplies and the soaring cost of energy have stoked fears Germany could fall into recession over the winter season.