German Industrial Output Unexpectedly Falls Amid China Risks

German November Industrial Output Falls 0.3%
  • Production down 0.3% in November vs estimate for 0.5% increase
  • Output set to benefit from jump in factory orders, confidence

German industrial production unexpectedly fell in November, led by investment goods, in a sign that a slowdown in emerging markets such as China and Brazil may weigh on economic growth.

Output, adjusted for seasonal swings and inflation, slid 0.3 percent from October, when it gained a revised 0.5 percent, data from the Economy Ministry in Berlin showed on Friday. The reading, which tends to be volatile, compares with a median estimate for a 0.5 percent gain in a Bloomberg survey of economists. French industrial production slumped 0.9 percent, according to a separate release.

Germany’s BGA trade group warned this week that a ‘hard landing’ in China will push Europe’s largest economy into a recession and argued that the weak euro is exaggerating the country’s economic strength. The Bundesbank has expressed confidence in the recovery, pointing to an expected pickup in global trade and robust private consumption benefiting from record-low unemployment and rising wages.

“Economic momentum in Germany continues to be fed by private and public consumption, and additionally by a pickup in construction,” said Christian Lips, an economist at NordLB in Hanover. “China’s economy moved into the focus again this week,” but “for Germany, we are convinced that the economic recovery will continue,” he said.

China has roiled financial markets across the globe after equity prices slumped and the yuan depreciated, raising concern that a slowdown in the region’s largest economy is deepening. The International Monetary Fund predicts growth will slow to 6.3 percent this year from 6.8 percent in 2015.

German exporters are responding by turning their focus to recovering economies such as the U.S. Shipments to the world’s largest economy jumped more than 20 percent in the 10 months through October from the previous year, while sales to China slipped 4.2 percent.

Total foreign sales rose 0.4 percent in November, the Federal Statistics Office said on Friday. Imports were up 1.6 percent from the previous month.

In France, manufacturing increased 0.4 percent in November after a drop of the same extent the previous month.

German manufacturing output slid 0.8 percent, driven by a 3.3 percent slump in the production of investment goods. Energy production jumped 2.5 percent and construction climbed 1.6 percent.

“Manufacturers were hesitant in planning production in the final quarter of 2015,” the ministry said in a statement. “The slowdown in some emerging markets was decisive in this. Even so, factory orders have increased lately and business confidence also improved.”

The ministry said on Thursday that German factory orders increased 1.5 percent in November as demand for basic goods surged the most in almost five years.

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