BERLIN, Aug 7 — German industrial production unexpectedly decreased in June, highlighting the risks for Europe’s largest economy from weaker growth in emerging-market countries such as China.
Output, adjusted for seasonal swings and inflation, fell 1.4 per cent after rising a revised 0.2 per cent in May, data from the Economy Ministry in Berlin showed today. The typically volatile number compares with a median estimate of a 0.3 percent gain in a Bloomberg survey. Exports fell one per cent while imports dropped 0.5 per cent.
Some manufacturers, although benefiting from cheap oil, low interest rates and a recovering euro area, have faced a drag in recent months as a result of Greece’s crisis and a slowdown in China. Even so, the Bundesbank predicts “quite robust” economic growth for this year as record employment fuels consumption.
“It remains to be seen whether the economic weak phase in China will damp German factory orders in the coming months,” said Stefan Kipar, an economist at BayernLB in Munich. For the moment, “the outlook for the German economy continues to be positive.”
Business confidence increased in July after Greece struck a deal with its creditors, and economists predict German growth accelerated to 0.5 per cent in the second quarter from 0.3 per cent in the previous three months.
Posing a potential risk to Germany’s export-driven economy, China is growing at its slowest pace since 1990. Officials are paving the way for new spending after four interest-rate cuts and other measures to boost lending have failed to gain much traction.
Data breakdown
German manufacturing output fell 1.3 per cent in June, driven by a 2.6 per cent slump in the production of investment goods, the ministry said. Construction plunged 4.5 per cent, while energy output rose 2.3 per cent. Total industrial production stagnated in the second quarter.
While output was “little dynamic” in the three months through June, “the conditions in the sector continue to be good,” the ministry said. “In light of the latest positive order intake and the continued good sentiment among companies, a continuation of the moderate upward trend in manufacturing is to be expected.” — Bloomberg
