German economic slump: Brexit blamed for ‘significantly damaging’ Berlin’s production

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The industrial output from German factories has decreased since the beginning of the year. This is partly due to access problems to semi-conductors for the automotive industry, one of the powerhouses of the German economy. But, now other industries, such as construction and energy suppliers, are producing 2.5 percent less than in the previous month.

The German construction industry has seen a much more dramatic decrease in economic activity, with a significant decrease of 12.2 percent.

The news of the constricting industrial output comes as German economists had forecast an increase in output.

The German economic ministry has said: “Despite the measures to combat the pandemic, industrial output recorded only a slight decline in January, mainly due to the shortages in semiconductor products in the automotive industry.”

However, German economist Alexander Krüger maintains that Brexit is the main reason for the slump in German manufacturing output.

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He said: “The decline in production is probably primarily a consequence of Brexit.

“Disrupted supply chains in the auto industry are an additional hurdle, but they should not become permanent.”

However, another German economist said that this slump in industrial output is only temporary and the manufacturers are adapting to supply-chain changes.

Economist Thomas Gitzel from VP Bank said: “Industrial production will therefore be able to increase in double digits in February.”

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Network Research Fellow at CESifo Professor John Ryan has spoken of the decline in trade between Berlin and London has hurt the German economy.

In a recent article for the London School of Economics, Professor Ryan said that “Brexit has already significantly damaged the overall German economy”.

In 2015, the UK was Germany’s third-largest customer.

German exports to the UK stood at £80 billion.

But now the trade volume has severely slumped, making the UK now Germany’s fifth-biggest trade customer.

German economists expect different rates of recovery from different industries.

Ifo expert Klaus Wohlrabe said: “The expectations of the industries are very different.

“The auto industry wants to expand its production particularly strongly, but the clothing industry is planning to limit its production.”

Additional reporting by Monika Pallenberg.

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