Industrial slump and building price explosion

The news from the German economy is becoming more and more alarming. The industry is weakening considerably. And in construction the prices only know the way up.

The industry in Germany has in August produced considerably less than in the previous month. And the prices for house and apartment construction have risen tremendously.

Industry, construction and energy suppliers had to accept a sharp decline in production on balance in August. Total production fell by 4.0 percent compared to July, as the Federal Statistical Office announced today. This is the strongest decline since the slump during the first Corona wave in spring 2020. It was also much stronger than analysts had expected.

Slump in all areas

Order numbers had already disappointed yesterday and showed how badly the industry is currently suffering from the many shortages in international trade in goods. “ The delivery bottlenecks for raw materials and intermediate products turned out to be more serious than previously assumed,” commented the Federal Ministry of Economics.

The slump affected almost all industrial sectors. The production of goods in industry fell by 4.7 percent. The production of capital goods such as machines decreased particularly significantly. Activity in construction fell by 3.1 percent. Only the energy production was higher than in July.

If you compare the figures with the last month, which was only slightly affected by the effects of the pandemic – February 2020 -, total production was 9.0 percent lower. “Delivery bottlenecks, high energy prices and production downtimes: a toxic brew that smells a bit of stagflation,” commented economist Jens-Oliver Niklasch from LBBW.

A small glimmer of hope

At least the companies assume that they will produce more again in the future. The barometer for production expectations climbed by two to 29 points in September, as the Ifo Institute found in its company survey. “The continued good production prospects can also be attributed to catch-up effects due to the corona pandemic,” explained Ifo researcher Klaus Wohlrabe.

Construction prices are rising unchecked

The general upward trend in prices, which can be seen, for example, in producer and import prices, is also becoming increasingly noticeable in construction. The construction of conventionally manufactured residential buildings in Germany became more expensive in August than it has been since 1970. According to the Federal Statistical Office, prices were 12.6 percent above the level of the same month last year. That is certainly one of the reasons why real estate prices are rising rapidly .