In September, German industrial output unexpectedly declined as supply bottlenecks for raw and preliminary materials continued to hinder Europe's largest economy. 

According to the Federal Statistics Office, industrial output decreased by 1.1% MoM, following an upwardly revised drop of 3.5% in August. 

Production in the manufacturing sector declined by 2.4% in Q3 compared to the previous quarter, and is now 9.5% lower than it was in February 2020, before the coronavirus pandemic in Germany began.

The September decrease was caused by a drop in production in the mechanical engineering, electrical equipment, and data processing equipment sectors, said the economy ministry. Adding, “supply bottlenecks for raw materials and intermediate products that have been going on for a long time are being reflected on a larger front.”

Germany's industrial output outlook, according to Thomas Gitzel, an analyst at VP Bank, is dismal, as companies expect material shortages to last until the end of next year. Increasing gas and energy prices, he warned, would contribute to the negative effects on production.

"The future quarters will be difficult," Gitzel predicted, adding that Germany's economic output was expected to stagnate in Q4. "However, it is also evident that if the flow of materials is restored, the current situation will turn into its opposite," he stated.