German Industrial Output Rises More Than Forecast
Production jumped 2.8 percent from February, when it dropped 0.3 percent, the Economy Ministry in Berlin said today. February output was revised up from a 1.3 percent decline. Economists forecast a March gain of 0.8 percent, the median of 38 estimates in a Bloomberg News survey shows. In the year, production advanced 1.6 percent when adjusted for working days.
Germany’s economy shrank in the final quarter of 2011 as the euro region’s debt crisis damped demand for its goods. Today’s report is the latest to suggest a second quarter of contraction -- the technical definition of recession -- may have been averted as companies tap faster-growing Asian markets. Factory orders gained a better-than-forecast 2.2 percent in March and business confidence unexpectedly rose to a nine-month high in April.
“The debt crisis damps demand for German products in Europe but Russia, China, India, Brazil and South Africa should generally be able to compensate declining sales,” said Gerd Hassel, an economist at BHF Bank AG in Frankfurt. “Germany’s recovery is also based on strong domestic demand as high employment, rising wages and increasing investment fuel consumption and industrial output.”
Germany’s benchmark DAX share index pared losses after the report and traded at 6,510 at 12:13 p.m. in Frankfurt, down 0.9 percent today. It is up 10 percent this year. The euro was little changed at $1.3016.
Production of investment goods rose 2 percent in March and consumer goods increased 3 percent, today’s report shows. Construction activity surged 30.7 percent after a 16.9 percent slump in February due to cold winter weather.
The Economy Ministry said first-quarter production matched output in the fourth quarter. “Industrial activity is gathering pace and the outlook has improved markedly,” it said.
Germany’s top three carmakers and their suppliers have benefited most from thriving demand in China, with first-quarter profits at Bayerische Motoren Werke AG, Volkswagen AG (VOW) and Daimler AG (DAI) all beating analyst estimates.
With unemployment at the lowest level since reunification, German workers are securing some of the biggest wage increases in two decades. By contrast, joblessness in the 17-nation euro region rose to a 15-year high in March and manufacturing contracted for a ninth month, adding to signs the economic slump is deepening.
Italian manufacturing output has been contracting since August and Spanish industrial production slumped 10.4 percent in March from a year earlier.
“Demand from China is not going to entirely offset the weakening demand from the region’s periphery,” said Jens Sondergaard, senior European economist at Nomura International Plc in London. “When you have the third- and the fourth-largest economies of the euro area in a freefall in terms of industrial production, it is unlikely that Germany can decouple from the other euro-area countries’ economic cycle.”
The International Monetary Fund forecasts the euro economy will contract 0.3 percent this year, compared with projected expansions of 2.1 percent in the U.S. and 7.3 percent in developing Asia. It predicts 0.6 percent growth in Germany.
European Central Bank President Mario Draghi last week left open the door for more stimulus if the debt crisis continues to weaken the euro-area economy.
“We saw stabilizing economic activity at low levels in the first three months” of the year, Draghi said after policy makers kept interest rates at a record low on May 3. “The most recent survey indicators show uncertainty prevailing.”
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