VCI slashes German chems growth forecast on sluggish economy

LONDON (ICIS)–A more sluggish German economy in the second quarter of the year had a noticeable effect on the country’s chemicals and pharmaceuticals industries, trade body VCI said on Tuesday, with sector production falling 2.3% compared to the first quarter.

Tepid growth rates in the country have led the association to cut its year-on-year production growth forecasts for the industry this year to 1.5%, compared to earlier predictions of 2% growth.

Forecast full-year industry sales were also cut by €500m from an earlier forecast to €192.5bn, as a predicted 1% year on year drop in prices cut into expectations of a 1% rise in sales over the same period.

Chemical and pharmaceutical sector production and sales dropped during the second quarter compared to the first three months of the year due to a decrease in demand from industrial end-markets, attributed by VCI to perceived geopolitical risks.

While domestic business was hit particularly hard, exports also suffered due to the slow eurozone recovery, VCI added. Domestic sales fell 2.8% to €17.8bn during the quarter and total seasonally adjusted chemical industry sales dropped 1.2% year on year to €45.8bn.

The decline in chemicals production was most pronounced for basic chemicals, VCI said, and industry-wide capacity utilisation remained at 84.4%. Prices remained stable quarter on quarter but remained 1.7% below the second quarter 2013, the association added.

VCI president Karl-Ludwig Kley said that economic conditions could strengthen for the latter half of the year provided that the Ukraine conflict and other international crises did not deteriorate.

“For the second half of the present year we are expecting the demand to pick up again somewhat if the geopolitical situation does not get any worse,” Kley said.