COVID-19 takes toll on German production

Figures show biggest decline in output since records first kept in January 1991

Germany's industrial production in April suffered its sharpest fall since records began, despite the country having one of the most effective novel coronavirus lockdown systems.

A fall in productivity of 8.9 percent in March was followed by another of 17.9 percent in April, 25.3 percent down on the same period 12 months earlier, making for the largest decline since records were first kept in January, 1991.

"Two months of COVID-19 have already left a more adverse impact than the entire financial crisis," said Carsten Brzeski, chief economist of euro zone at Dutch bank ING.

This has happened despite Germany having felt the effects of the novel coronavirus far less severely than many of its neighbors. Although its total of 185,750 cases is only marginally less than France, which has seen around 191,000 cases, in Germany, there have been just 8,685 deaths, as opposed to more than 29,000 in France.

Germany's all-important auto industry has particularly hard-hit, with a month-on-month decline of 74.6 percent, although dealerships were allowed to reopen and car production was allowed to restart at the end of April.

Other measures have continued to be lifted on a gradual basis, with a relaxation of travel bans expected later this month.

Brzeski said the lifting of lockdown should lead to "a strong rebound in economic activity", but warned that: "the period after the imminent rebound does not look too promising", and that the car industry could continue to struggle.

"Contrary to the financial crisis and the important role of Asian countries in the swift recovery of German industry back then, there is currently no savior in sight to quickly boost external demand," he added. "The automotive industry … will have a hard time quickly returning as the economy's poster child."

Exports are unlikely to offer Germany an economic lifeline, either. According to figures from the Federal Statistics Office, exports to France and the United States, two countries hit hard by the novel coronavirus, suffered the biggest fall, while those to China, which is ahead of most countries in terms of recovery from the virus, were less affected. A blog on the ING website explained the current situation, and the prospects for the future, in blunt terms.

"In the midst of the financial crisis, it took German exports five months to shrink by a total of 26 percent. In the COVID-19 crisis it only took the month of April to get practically the same result," it said.

"After the 2008/09 crisis, it was the Asian countries and strong demand for German investment goods which helped the German economy to overcome the recession swiftly. This time around, the economy will have to look to something other than exports to stimulate growth."