German recession deepens

WESTERN GERMANY lurched further into recession as industrial production fell 1 per cent in February alone and by 11.5 per cent over 12 months, the Economic Ministry said.

Investment goods output, a mainstay of German industry, collapsed by 2.5 per cent between January and February. This brings the slump in investment goods output to 18 per cent over the year.

The decline in manufacturing industry (which excludes mining and quarrying) was 12.7 per cent over the year to February.

Despite the indications of deepening recession, the Bundesbank left Germany's key interest rates unchanged, placing concerns about the mark and the recent high 4.3 per cent inflation rate before the pleas from industry for relief.

The outlook for manufacturing, which has so far borne the brunt of the downturn, is now even bleaker. The Munich-based IFO economics institute yesterday forecast a 7 per cent fall in western German industrial production for 1993.

Plans for sharp cuts in investment and production are the main causes for the expected decline, the institute said, after publishing its survey of manufacturing, distribution and construction firms. The heaviest fall will take place in the automobile sector where output could plunge by one fifth, it said.

Exports will continue to be dragged down by the strong mark and unfavourably high production costs, it added.

The uneven nature of the German recession, which has so far left much of the service sector unscathed, was highlighted yesterday by Dresdner Bank's continuing strong performance.

Its operating profit rose by 13 per cent to DM2.8bn in 1992 and the group's provisions against bad debt were DM466m with a further DM46m earmarked for further credit risks.

The real unemployment rate in eastern Germany, at 35 per cent, was more than double the figure normally given, the Federal Statistical Office revealed. Early retirement, job maintenance and creation schemes continue to disguise the extent of the losses. The total number of jobs in industry in the east fell from more than 2 million in January 1991 to just 762,000 at the end of last year.

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