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German industrial production falls below expectations in March

German industrial production dropped well below expectations in March, as the impact from the war in Ukraine starts to bite stronger and Covid restrictions in China further disrupted supply chains and added to persisting difficulties for manufacturers to fill the orders.

The data released on Friday showed German monthly industrial production fell by 3.9% in March, hitting the lowest since June 2020, when the economy was strongly hurt by pandemic lockdowns, after it grew by 0.1% previous month and strongly disappointing expectations for a drop of 1%.

Industrial companies registered the sharpest monthly fall in new orders in five months, as the data showed a drop of 4.7% in March, mainly due to a reduction in orders from abroad.

Rising raw material prices and persisting supply chain disruptions continue to harm the industry, with soaring inflation and war, adding to negative conditions and darkening the outlook.

Economists expect the German economy to stagnate in the second quarter, due to difficult economic environment, which is likely to worsen in coming months.