Tariffs "weigh" on the German economy - Exports and industrial production shrink in April
Germany's industrial production and exports fell in April after a recent surge in the first quarter, a reversal that suggests the earlier gains were linked to increased activity before the tariffs were imposed.
The manufacturing sector fell by 1.4% month-on-month and by 1.8% compared to April 2024. In March, this total increased by 2.3% compared to the previous month and fell by 0.7% year-on-year.
Meanwhile, German exports also disappointed in April, shrinking by 1.7% compared to March and by 2.1% compared to the same period last year. On the other hand, imports expanded by 3.9% from March to April, while annual growth was 3.8%.
"Today's industrial production data reflects a reversal of the first quarter's strong activity and suggests that structural weakness in the industry is not over yet," analysts say.
"However, at the same time, there is growing evidence that the German industrial cycle is gradually recovering, as industrial orders have improved and inventory levels have started to fall," they added.
Despite some positive aspects in the data, tariff threats from the US administration are weighing on Germany's outlook, which is already hampered by structural issues.
GDP, however, grew by a better-than-expected 0.4% in the first quarter of the year, boosted by businesses seeking to avoid Trump's tariffs.
Economists hope that the European Central Bank's interest rate cut this week, along with increased defense spending, will support Germany's expansion in the future.
Berlin has approved a constitutional change to the "debt brake," meaning defense spending above 1% of GDP will not be subject to borrowing limits. The government has also created an extrabudgetary fund of 500 billion euros for additional infrastructure investment.
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