Tuesday 27 June 2017

German industrial production jumps in August

Industrial production in Germany increased more than three times the pace economists forecast in August, led by demand for investment goods such as machinery.

Production jumped 1.7pc from July, when it rose 0.1pc, the Economy Ministry in Berlin said today.

Economists had forecast a gain of 0.5pc, the median of 36 estimates in a Bloomberg News survey showed. From a year earlier, production increased 10.7pc when adjusted for the number of work days.

Today’s data adds to signs that Germany’s slowdown from the fastest growth in almost two decades in the second quarter may be limited.

Factory orders surged in August and business confidence rose to the highest level in more than three years in September.

Nevertheless, the euro’s 17pc gain against the dollar over the past four months may dent export demand outside the euro area, curbing production.

“Germany remains the tower of strength and will sail relatively well through coming quarters,” said Joerg Lueschow, an economist at WestLB AG in Dusseldorf. “The economic upswing continues, though with less momentum than in the second quarter.”

The euro was little changed after the release, trading at $1.3977 at 12:11pm in Frankfurt, up from $1.3930 yesterday.

Manufacturing output rose 1.8pc in August from the previous month, today’s report showed.

Output of investment goods jumped 2.6pc in the month and production of durable consumer goods gained 2.4pc. Construction output slipped 0.4pc, the ministry said.

‘Upward trend’

“As expected, the upward trend of industrial production weakened after the extraordinary dynamic in the second quarter,” the ministry said in the statement.

“But due to the improved order situation, the upward trend should continue.”

The European Commission last month raised its forecast for German economic growth to 3.4pc from a previously projected 1.2pc.

The 16-member euro region is seen expanding 1.7pc with more “moderate” growth in the second half, according to the Brussels-based commission.

Siemens AG, Europe’s largest engineering company based in Munich, on September 27 predicted an increase in fiscal fourth- quarter profit to “very satisfactory” levels as orders for industrial equipment rebound.

BASF SE, the world’s biggest chemical maker, expects a jump in sales this year after demand from China spurred production during the usually slower summer months, the company said September 22.

China’s expansion has served as a “linchpin” for global trade, benefiting economies like Germany that sell capital goods, the International Monetary Fund said yesterday.

Still, “China will provide only a partial offset to the weaker demand from advanced economies,” the Washington-based fund said.

The euro-area economy, Germany’s biggest export market, is showing signs of weakening. A gauge of services and manufacturing industries in the region fell to a seven-month low in September and unemployment held at the highest in more than 12 years in August.

Europe’s recovery “has finally gained some vigor, but it is still likely to be moderate and uneven,” the IMF said. “Downside risks still loom large.”

Bloomberg

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