Germany’s industrial production took a significant hit at the end of 2024, recording its steepest decline since July. A key factor in this drop was the ongoing struggles in the automotive sector, though economists remain cautiously optimistic about the future.

According to the Federal Statistical Office (Destatis), production in the manufacturing sector fell by 2.4% in December compared to the previous month. On an annual basis, the situation appeared even more concerning, with industrial output contracting by 4.5% over the year.

Worse Than Expected

The December slump exceeded expectations, as analysts had predicted a more modest decline of just 0.7%. Adding to the downturn, data from November was revised downward, with the monthly increase adjusted to 1.3%, instead of the previously reported 1.5%.

Auto Industry Struggles

The primary driver of the decline was the automobile industry, which suffered a sharp 10% drop in production compared to November. Additionally, setbacks in machinery maintenance and assembly also contributed to the overall contraction.

However, not all sectors performed poorly. The pharmaceutical industry provided a rare bright spot, recording an impressive growth of 11.6% in December, offering some balance to the otherwise gloomy industrial landscape.

Despite the downturn, some experts believe the economy could see a rebound in the coming months, depending on market conditions and policy interventions.