German Industrial Production Falls Less Than Forecast; Factory Orders Slow
Industrial production in Germany, Europe’s largest economy, declined less than economists forecast in August after surging in the previous month.
Output fell 1 percent from July, when it jumped 3.9 percent, the Economy Ministry in Berlin said today. Economists forecast a 2 percent decline, according to the median of 35 estimates in a Bloomberg News survey. In the year, production rose 7.7 percent when adjusted for working days.
The German economy came to a near standstill in the second quarter and European Central Bank President Jean-Claude Trichet said yesterday that expansion in the 17-nation euro area, Germany’s largest export market, will be “very moderate” in the second half of the year. Confidence among German businesses and investors worsened in September as the region’s debt crisis threatens to derail growth.
“At the moment, companies are benefiting from existing orders on their books, but we have to expect weaker data as fears about the debt crisis and financial-market tensions push back investment decisions,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “I’m seriously concerned about a recession in Germany.”
Production of consumer goods slumped 4.9 percent in August and construction activity declined 1.2 percent, today’s report showed. Production of investment goods rose 0.2 percent.
While industrial production continues to expand, slowing factory orders suggest the growth dynamic will weaken further, the Economy Ministry said.
German factory orders unexpectedly declined for a second month in August, led by a drop in domestic demand, the ministry said yesterday. Orders for investment goods also decreased.
The Bundesbank on Sept. 19 predicted “robust” growth in the third quarter. At the same time, it said the outlook “has clouded more than previously expected amid heightened uncertainty” as Greece teeters on the brink of default and global growth slows.
The International Monetary Fund last month lowered its growth forecasts for Germany to 2.7 percent from 3.2 percent for 2011 and to 1.3 percent from 2 percent for 2012.
Deutsche Lufthansa AG (LHA) expects its cargo business to be weaker in coming months amid faltering global trade, Chief Financial Officer Stephan Gemkow told Boersen-Zeitung in an interview published Oct. 3. The airline last month lowered its full-year profit forecast and said it would deepen capacity cuts this winter.
Vossloh AG (VOS), a manufacturer of railroad equipment, cut its full-year sales forecast on Sept. 29, citing slower business in China and a “sharp reduction” in orders from southern Europe.
“Capacity utilization is declining, partly reflecting more cautious investment behavior but also a slowdown of the economy,” said Jens Sondergaard, senior economist at Nomura International Plc in London. “The question is whether market confidence will return at the beginning of next year and release pent-up demand for German industrial goods. The more uncertainty lingers on around the debt crisis, the more unlikely it becomes.”
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