Germany's Q2 chemicals production drops as sales stagnate
German chemicals and pharmaceutical production dropped 0.7% in April-June, compared with the first quarter, and 8.8% year on year on the back of the domestic industrial slowdown as sales stagnated and capacity utilisation fell, trade group VCI said on Wednesday.
The fourth consecutive quarter of German industrial decline weighed on new orders for chemicals and pharmaceuticals producers in the country, exacerbated by fewer overseas orders as the eurozone's economy continued to weaken.
The extent of the year-on-year production fall was driven by woes in the pharmaceutical sector, with the fall for the chemicals sector alone moderating to 3.9%.
The current state of the German and eurozone economies means that a rebound in chemicals sector demand, expected for the second half of the year, has yet to be felt, according to VCI's president Hans Van Bylen.
“The recovery of German industry overall, which was anticipated for the second half of the year, is not materialising," he said.
"At present, the companies are no longer expecting German and European chemical business to pick up. Only few growth impulses are likely to come from trading with the US and Asia due to the geopolitical risks."
OUTPUT AND SALES DOWN, PRICES UP
Given the current sector sluggishness, the group is now forecasting a 6% drop in production for 2019 in chemicals including pharmaceuticals.
With a 1% increase in pricing expected for the same period, overall sales should fall 5% to €193bn.
Domestic sales fell both year on year and quarter and quarter during the period, while foreign sales strengthened modestly compared to the previous quarter, up 0.8%, but were down 4.7% compared to the second quarter of 2018.
The German economy contracted 0.1% in the second quarter of the year, raising fears that the country will enter recession, as the momentum of domestic demand that had counterbalanced weaker export business continued to slow.
The GDP data marks “the end of a golden decade” for the German economy, analysts at ING Bank said in August, after averaging 0.5% quarter-on-quarter growth every period since the end of the post-financial crash recession in 2009.