Thursday 23 March 2017

German production rises less than expected

Industrial production in Germany, Europe’s largest economy, rose less than economists forecast in July, suggesting the recovery is losing momentum.

Production increased 0.1pc from June, when it declined 0.6pc, the Economy Ministry in Berlin said today.

Economists had forecast a gain of 1pc, the median of 40 estimates in a Bloomberg News survey showed. From a year earlier, production increased 10.9pc when adjusted for the number of work days.

Today’s data adds to evidence that the German economy is cooling after expanding at the fastest pace in two decades in the second quarter.

Exports fell in July for the first time in three months, while manufacturing growth eased in August.

Still, business confidence rose to a three-year high and Daimler AG, the world’s second-biggest manufacturer of luxury cars, said last week that Mercedes-Benz sales jumped in August as Chinese demand soared.

“Nobody expects the economy to power ahead at the same pace as in the first half of the year,” said Carsten Brzeski, an economist at ING Group in Brussels.

“At the same time, the order books are still full and China is not all of a sudden going to stop ordering machines.”

The euro was little changed against the dollar after the report and was trading at $1.2678 as of 11:02am in London

‘Slower pace’

Manufacturing output was unchanged in July from the previous month, today’s report showed.

Output of investment goods declined 0.7pc in the month and production of basic goods rose 0.4pc. Construction output increased 0.9pc.

“It was to be expected that the pace of industrial production growth would weaken” after a strong first half, the ministry said in the statement. “The industrial recovery will continue, albeit at a slower pace.”

Germany’s economy may struggle to gather strength as the global recovery weakens and European governments cut spending to push down budget deficits that soared during the recession.

While order books remain full for now, “there are signs of cooling,” the head of Germany’s BGA wholesalers and exporters group Anton Boerner said yesterday.

“We’re watching the fourth quarter carefully because there are economic uncertainties,” he said, citing concern about a renewed US recession.

German plant and machinery orders jumped 48pc in July from a year earlier, the Frankfurt-based VDMA machine makers’ association said on September 1. Export orders surged 54pc.

Daimler said on September 3 that sales at its Mercedes-Benz unit increased 22pc in August from a year earlier.

Sales in China more than doubled. ThyssenKrupp AG, Germany’s largest steelmaker, last month raised its earnings outlook for the current fiscal year.

Germany’s “growth tempo will normalise after the extraordinarily dynamic second quarter,” the Bundesbank said on August 19.

“But all in all, the fundamental economic situation in Germany is very favorable at the moment.”

Bloomberg

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