FRANKFURT – German Chemical Industry Association VCI on Tuesday cut its forecast for the year, as weak domestic demand and increasing geopolitical tensions led to a drop in chemical production in the second quarter compared with the first quarter.
In the second-quarter, chemical and pharmaceuticals production in Germany sank 2.3% on the quarter, but rose 0.3% on the year, as German chemical producers decided to restrict production because of geopolitical risk.
Domestic sales of chemicals and pharmaceuticals fell 2.8% on the quarter, while exports were down 0.9% over the same period. Total sales dropped 1.2% on the quarter, leaving sales flat on the year.
For the full year, the association expects chemical production to rise 1.5% compared with its previous forecast of a 2% rise. Sales are expected to rise 1% to EUR192.5 billion, down from the previous forecast of a 1.5% rise.
“We expect a modest recovery in demand in the second half of the year, if the geopolitical situation doesn’t deteriorate further,” VCI President Karl Ludwig Kley said in a statement.
The association cited falling gross domestic product growth in core European Union countries such as France, Italy, and Germany for the decline in production, while economies on the periphery such as Spain, Portugal and Greece fared better.
By Chase Gummer
Source: Market Watch
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