Industrial production in Germany plunged in July for the third consecutive month, against a backdrop of high energy costs and sluggish demand for the sector which have plagued Europe’s largest economy for several months.

It fell by 0.8% over one month in data adjusted for seasonal and calendar variations, after a revised drop of 1.4% in June, the statistical office Destatis said in a press release on Thursday. The decline is much stronger than expected by the experts of the financial analysis tool Factset, who expected a drop of 0.3%. Over one year, industrial production fell by 2.1%. In detail, the production of capital goods fell by 2.9%, that of consumer goods by 1.0% and intermediate goods by 0.7%.

German industry, the pillar of Europe’s leading economy, has been suffering for several months. It is weighed down by a sharp fall in domestic demand, due to inflation which remains at high levels (6.1% over one year in July), and by the rate hikes carried out with a vengeance by the European Central Bank (ECB).

Energy prices also remain relatively high for the branch and some of the most energy-intensive activities, such as chemicals, are struggling to return to their pre-war production levels in Ukraine. The energy-consuming branches produced 11.4% less in July over one year. Exports, essential for the sector, are less dynamic against a backdrop of slowing demand for German products in China and the United States, two crucial markets for the sector.

“Another figure that underlines the continued collapse of the economy. The third quarter should see a fall in GDP,” comments Jens-Oliver Niklash, analyst for LBBW. Germany experienced zero growth in the second quarter of 2023, after two quarters of falling GDP.

For 2023, the main German economic institutes expect a decline in GDP in Germany, the IMF for its part expecting -0.3%. The Kiel Economic Institute on Thursday released an estimate of a 0.5% drop in GDP in 2023.