By Ed Frankl


German industrial production fell again in October as the sector continued to struggle, with swathes of layoffs and potential trade tariffs threatening to compound the problem.

Output dropped 1.0% on month in October, German statistics agency Destatis said Friday, weaker than the 1.0% uptick expected by economists in a poll compiled by The Wall Street Journal. Production declined by 2.0% in September, and by 0.4% in the three months to October.

Energy production led the drop, sinking 8.9%, but Germany's car industry, a traditional source of its industrial identity, continued to stumble too, with output falling back 1.9%.

The auto sector is facing the threat of layoffs at industry titan Volkswagen, alongside already announced job cuts at Ford and car-parts makers Bosch and Schaeffler.

The risk of trade tariffs from the incoming administration of President-elect Donald Trump could add further pressure to Germany's industrial sector. November's collapse of the country's coalition government also raises uncertainty.

Industrial production remains well below prepandemic levels. The country's energy-intensive manufacturing sector has yet to recover from the energy-price spikes that followed Russia's full-scale invasion of Ukraine. Chinese competition in the car industry, alongside the economic slowdown there that hurt German exports, also contributed to industry's struggles.

"There's still no end in sight to the industrial slump in Germany," ING's global head of macro research, Carsten Brzeski, said.

"This is a very weak start to the fourth quarter, increasing the risk of a winter recession in Germany," he added.

Europe's largest economy is set to contract over 2024, with the economic slowdown in the eurozone as a whole having led the European Central Bank to accelerate interest-rate cuts since summer. The bank is widely expected to cut its key rate next week, which could provide a small boost for firms.

However, the outlook for German industry looks weak in the short-term, after incoming orders in manufacturing also slipped 1.5% in data published Thursday, with the auto industry and machinery particular drags.


Write to Ed Frankl at edward.frankl@wsj.com


(END) Dow Jones Newswires

12-06-24 0419ET