German industrial output posts record plunge
German industrial output posted a record plunge in April as the coronavirus pandemic forced manufacturers in Europe's largest economy to halt production, with firms expecting a bumpy road ahead despite a massive stimulus package.
Industrial output dropped by 17.9 per cent on the month, figures released by the Statistics Office showed. A Reuters poll had pointed to a slightly smaller fall of 16.0 per cent.
Manufacturers of capital goods recorded the steepest decline of -35.3 per cent. Output in the energy sector dropped by 7.2 per cent and construction was down 4.1 per cent.
As measures to contain the spread of the coronavirus were implemented from mid-March, the restrictions took their toll on a full scale in April, the Economy Ministry said.
"The low point has been reached. With the gradual easing of protective measures and the resumption of production in the automotive industry, the economic recovery is beginning now." The data strengthens expectations that the German economy will post its steepest decline since the end of World War Two in the second quarter.
"German gross domestic product is likely to shrink by more than 10 per cent in the second quarter, a reading never measured before in peacetime," VP Bank Group economist Thomas Gitzel said.
For 2020 as a whole, the government forecasts GDP will shrink by 6.3 per cent, based on the assumption that a 130 billion euro ($146.69 billion) fiscal stimulus package will help economic activity pick up again in the second half of the year. German Chancellor Angela Merkel's cabinet plans a special meeting on Friday to start implementing large parts of the stimulus measures, three sources told Reuters on Monday.
The cabinet is expected to clear the way for the agreed temporary cut in value-added tax, cash handouts for parents and bigger incentives to buy electric cars, the sources said.
Despite the package, manufacturers expect production levels to decline further in the coming three months, but at a slower pace than previously, the Ifo economic institute said on Monday.
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