The situation in industry in Germany remains tense: production fell surprisingly sharply in June.

Manufacturing production fell by 1.9 percent month-on-month, the Federal Statistical Office announced in Wiesbaden on Thursday. This means production reached its lowest level since May 2020, when production collapsed as a result of the coronavirus pandemic.

In addition, production was unexpectedly weak in May. The Federal Office revised the data downward. According to the figures, production decreased by 0.1 percent, compared to a previously reported increase of 1.2 percent. "The exceptionally high revision is due to corrected reports from some companies in the automotive industry," the Federal Office explained.

Analysts had expected a decline in production for June, but on average had only expected a 0.5 percent drop. Year-on-year, the statistics office also reported an unexpectedly sharp decline of 3.6 percent.

The press release further states that weak development in the pharmaceutical industry was a particular burden. The Federal Office reported a slump in production of eleven percent month-on-month in June. Mechanical engineering also performed poorly, with a decline of 5.3 percent. However, an increase in energy production had a positive impact.

"The weak development of industrial production in the second quarter is likely partly a reflection of a countermovement to the anticipatory effects associated with the announced tariff increases," the Federal Ministry of Economics stated. Due to the US tariffs, "no impetus for a sustained upswing in the industrial economy is foreseeable even at the beginning of the third quarter."

The previous day, incoming orders had already been disappointing. Orders had fallen again in June. This was due to fewer orders in the automotive industry and weak growth in large orders. In its most recent monthly report, the Bundesbank warned of significant burdens on the German economy due to the effects of high US tariffs.