German Industrial Production Rebounds in Sign of Solid Recovery

German manufacturers are benefiting from rising domestic demand and continued expansion in the euro area even as China’s slowdown drags on global growth.

German manufacturers are benefiting from rising domestic demand and continued expansion in the euro area even as China’s slowdown drags on global growth.

Photographer: Dadang Tri/Bloomberg
  • Economy ministry reports 0.7 percent increase in July output
  • Production falls short of median estimate in Bloomberg survey

German industrial production increased in July, signaling that Europe’s largest economy is weathering the headwinds of slowing global growth.

Output, adjusted for seasonal swings and inflation, rose 0.7 percent after dropping a revised 0.9 percent in June, data from the Economy Ministry in Berlin showed on Monday. The typically volatile number compares with a median estimate of a 1.1 percent gain in a Bloomberg survey. Industrial production advanced 0.5 percent from a year earlier.

German manufacturers are benefiting from rising domestic demand and continued expansion in the euro area even as China’s slowdown drags on global growth. The Bundesbank predicts Germany’s economic performance will be “quite robust” as record employment fuels consumption.

“Germany is actually running on all the engines that are possible apart from the external demand coming out of emerging markets,” said David Milleker, chief economist at Union Investment Privatfonds GmbH. “It’s nice, it’s solid, but it’s not euphoric because we have that drag.”

Construction led the July gain, increasing 3.2 percent from the previous month, the ministry report showed. Production of investment goods climbed 2.8 percent, energy output rose 1.9 percent and manufacturing advanced 0.3 percent. Production of consumer goods dropped 3.7 percent and output of intermediate goods slid 0.8 percent.

“Companies continue to be optimistic,” the ministry said in a statement. “High overseas demand filled the order books.”

German business confidence unexpectedly rose in August as companies brushed off concerns that China’s slowdown will harm the nation’s economic recovery. Growth in the Asian country, Germany’s third-largest trade partner, may slow to its weakest pace since 1990.

In a sign of the risks ahead, the European Central Bank downgraded its growth forecasts for the euro area last week, with President Mario Draghi citing a slowdown in emerging-market economies. Data on Friday showed German factory orders fell 1.4 percent in July, led by a 9.5 percent drop in demand from outside the euro area.

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