German industrial production falls

German industrial production fell more sharply than expected in August, official data showed Thursday, as supply chain frictions weigh heavily on Europe’s biggest economy.

Federal statistics agency Destatis said industrial output slumped by four percent month-on-month, after experiencing a rebound in July, according to figures adjusted for seasonal swings.

Analyst surveyed by Factset had predicted an August decline of just 0.1 percent.

“Producers continue to report about the production being constrained by a shortage of supply of intermediate products,” Destatis said in a statement.

Hardest hit was Germany’s flagship car industry with a 17.5 percent drop in output.

Like other automakers around the world, German manufacturers are grappling with a shortage in computer chips, spurred by a pandemic-induced surge in demand for electronic devices.

But the chips are also crucial components in conventional and electric vehicles, and giants like Volkswagen, BMW and Daimler have been among those forced to curtail production as they await fresh supplies.

Combined with global shortages of other key materials including timber, plastic and steel, analysts say clouds are gathering over Germany’s export-driven economy.

“Supply chain frictions have become a bigger threat to German industry than the pandemic,” said ING bank economist Carsten Brzeski.

“Disappointing industrial production in August suggests that the traditional growth engine of the German economy will again be a drag on growth in the third quarter,” he added.

Economic think-tank IfW recently downgraded its forecast for German economic growth for 2021 from 3.9 percent to 2.6 percent.