German October Industry Output Rises, Below Expectations

With factory output contracting in the third quarter, growth in Europe’s largest economy has been driven by domestic demand on the back of record-low unemployment and cheap oil.

With factory output contracting in the third quarter, growth in Europe’s largest economy has been driven by domestic demand on the back of record-low unemployment and cheap oil.

Photographer: Martin Leissl/Bloomberg
  • Production up 0.2% in October vs estimate for 0.8% increase
  • Energy output fell most since November 2008 after sunny summer

German industrial production rose less than economists predicted in October amid a slump in energy output.

Output, adjusted for seasonal swings and inflation, rose 0.2 percent from September, when it declined 1.1 percent, data from the Economy Ministry in Berlin showed on Monday. The reading, which tends to be volatile, is the first positive one in three months and compares with a median estimate for a 0.8 percent gain in a Bloomberg survey of economists. Production was unchanged from a year earlier

With factory output contracting in the third quarter, growth in Europe’s largest economy has been driven by domestic demand on the back of record-low unemployment and cheap oil. Further stimulus announced on Thursday by the European Central Bank is set to boost demand both within the country and in the euro area, Germany’s largest trading partner.

While “the industry’s safety net of low inventories and filled order books has become thinner,” at least for now, “industrial weakness is not a problem for the German economy,” said Carsten Brzeski, chief economist at ING-Diba AG in Frankfurt. “Domestic demand on the back of low interest rates, low inflation, higher wages and a strong labor market has become, and should remain, an important growth driver going into 2016.”

The euro was little changed after the report and traded at $1.0866 at 8:28 a.m. Frankfurt time.

Manufacturing output rose 0.7 percent in October from the previous month, driven by a 2.7 percent increase in investment-goods production, according to the report. Energy output slumped 5.9 percent, the most since November 2008.

“The latest high level of energy production couldn’t be maintained” after “the wind and sun-rich summer bolstered production of renewable energies notably,” the Economy Ministry said in a statement. Nonetheless, “industrial production started the fourth quarter on a positive note. That’s the first step to overcome the weak phase of the previous months.”

The ministry said Friday that factory orders rose for the first time in four months in October, increasing 1.8 percent. Unemployment fell to the lowest rate on record in November and business confidence unexpectedly jumped to the highest level since June 2014.

“The German economy is currently growing primarily on the back of lively domestic demand,” the Bundesbank said in a report published on Friday. “With export markets outside the euro area expected to rebound and economic growth within the euro area gaining a little more traction, the healthy underlying state of the German economy should stand out even more clearly over the next two years.”

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