German industrial output fell for the first time this year - highlighting the sector’s enduring challenges within Europe’s largest economy.

Production decreased 0.4% in March, led by drops in consumer and intermediate goods, and energy, the statistics office said on Wednesday. That was still better than the 0.7% decline estimated by economists in a Bloomberg poll.

European Central Bank president Christine Lagarde in April cited recent increases in German manufacturing output as a sign that the worst of the country’s’ troubles may be over.

Following two years of near-stagnation, Germany’s economy expanded by more than anticipated at the start of 2024. It remains fragile, though, in particular due to persistent weakness in manufacturing, which plays a bigger role than in other countries in the region.

Data on Tuesday showed factory orders unexpectedly dropped in March, with manufacturers still reeling from subdued global demand, high interest rates and more expensive energy following Russia’s war in Ukraine.

Steelmaker Salzgitter AG warned on Tuesday that profits look set to be weaker than expected this year as the downturn in the industry continues.

On a positive note, trade figures also published on Tuesday showed exports jumping 0.9% and imports notching a surprise advance. 

The Bundesbank said in April that “the economy in Germany has brightened somewhat, but a thorough recovery is not yet assured.” The government in Berlin recently lifted this year’s growth forecast to 0.3% from 0.2%.

  - Bloomberg