German industrial output hits 5-year low as U.S. tariff pressure mounts

BERLIN, Aug. 7 (Xinhua) -- Germany's industrial production fell sharply in June to its lowest level since May 2020, as mounting pressure from U.S. tariffs and weakening external demand weighed on Europe's largest economy.

The Federal Statistical Office (Destatis) said Thursday that industrial output declined 1.9 percent from the previous month and contracted 3.6 percent year-on-year. Key sectors recorded notable declines, particularly machinery manufacturing and the pharmaceutical industry.

Over the second quarter, output fell by 1 percent from the previous quarter, marking the weakest performance since the first half of 2020, the Destatis said.

In a statement, Germany's Federal Ministry for Economic Affairs and Energy said the quarterly decline partly reflected the fading of front-loading effects linked to announced U.S. tariffs earlier this year, which had temporarily boosted production in the first quarter.

The ministry warned that a near-term recovery in Germany's industrial economy remains unlikely, citing deteriorating tade conditions caused by U.S. tariff hikes and softening demand from non-eurozone markets.

"Today's industrial production data is a cold shower for our long-held view of at least a cyclical rebound in German industry," said Carsten Brzeski, global head of Macro for ING Research. He noted that output remains more than 10 percent below pre-pandemic levels.

Brzeski added that the full negative impact of U.S. trade policy was already evident in second-quarter earnings reports from major German companies exposed to American market. With a new 15 percent levy on most European goods coming into effect, "this trend will hardly change in the third quarter."

Separate data from the Destatis showed Thursday that while overall shipments ticked up in June, German exports to the United States dropped 2.1 percent month-on-month, marking the third consecutive decline and the lowest level since February 2022.

With around 10 percent of German goods heading to the United States, the new tariffs are expected to place further strain on Germany's export-driven economy, Brzeski warned. ■