Germany's chemical industry association, Verband der Chemischen Industrie (VCI), has adjusted downward its full-year 2014 business outlook following a weaker than expected second quarter.

Led by base chemicals, overall production deteriorated by 2.3% in Q2 2014 against Q1, figures show, although output was still 0.3% higher than in the 2013 quarter. Capacity utilization rates held up at 84%.

The association now forecasts an increase in annual chemical production of only 1.5%, compared with the 2% expected earlier this year. With prices expected to fall by 1% year-in-year, industry-wide turnover should increase by 1% to €192.5 billion, VCI said. This contrasts with earlier predictions of a 1.5% sales rise.

VCI president, Karl-Ludwig Kley, who is also CEO of Merck KGaA, said business in both domestic and foreign reacted to negative geopolitical trends in the second quarter. Falling GDP growth in core eurozone markets such as France and Italy burdened trading, while the traditionally weaker economies of Spain, Portugal and Greece fared somewhat better.

Alongside the softness abroad, business with domestic customers was less dynamic, as these reacted to the rising export risk by lowering order volume.

Across the chemical and pharmaceutical sectors, sales revenue dipped by 1.2% in Q2 against Q1 to €45.8 billion. In the same time frame, domestic sales fell by 2.8% to €17.8 billion, and foreign sales eroded by 0.9% to €28 billion across all geographies.

But even if business is not likely to bounce back to last year's level, Kley said chemical producers "expect a modest recovery in demand in the second half of the year, if the geopolitical situation doesn't deteriorate further."