German Recovery Signs Mount as Industrial Output Rises: EconomyJeff Black
German industrial production unexpectedly rose for a second month in March in a further sign that Europe’s largest economy is returning to growth.
Production increased 1.2 percent from February, when it gained 0.6 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.1 percent decline, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, production fell 2.5 percent when adjusted for working days.
While the coldest March in 25 years delayed Germany’s recovery from a slump in the final quarter of 2012, today’s report is the latest to suggest the economy is rebounding. Factory orders unexpectedly jumped for a second month in March, the Economy Ministry said yesterday, and unemployment remains near a two-decade low.
“German industry has entered the current quarter with a lot of momentum,” said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. “We expect a strong pickup in growth this quarter after a 0.2 percent increase in gross domestic product in the first quarter.”
The euro continued its advance after the report to trade at $1.3136 at 12:41 p.m. in Frankfurt, a gain of 0.4 percent today. European stocks climbed, with the Stoxx Europe 600 Index extending its highest level since June 2008, as companies from ING Groep NV to Deutsche Telekom AG posted quarterly earnings that beat estimates. The index gained 0.4 percent to 303.03.
German manufacturing output rose 1.4 percent in March, with production of investment goods up 2.1 percent, today’s report showed. Energy production surged 4 percent while construction activity fell 3.1 percent, reflecting the cold weather.
Production increased 0.2 percent in the first quarter from the fourth, the ministry said, adding that improving order books and an expected rebound in construction “should lend impetus to industrial production in the coming months.”
Factory orders rose 2.2 percent in both February and March.
The Bundesbank predicts the German economy will expand 0.4 percent this year and 1.9 percent in 2014.
While Germany is showing some signs of economic recovery, the 17-nation euro area remains in recession, prompting the European Central Bank to cut interest rates last week.
Euro-area services and manufacturing output shrank for a 15th straight month in April, and retail sales fell in March. Dutch industrial production fell 2 percent in March from February and 5.3 percent from a year earlier, another report showed today.
The European Commission last week cut its projections for the euro area, Germany’s biggest export market. It predicts the euro economy will shrink 0.4 percent this year after a 0.6 percent contraction in 2012.
ECB officials including President Mario Draghi said this week they stand ready to cut rates again if the economic outlooks worsens further.
Elsewhere in Europe, U.K. house prices rose to the highest in almost three years in April as low mortgage repayments helped support demand, Halifax said.
Home values increased 1.1 percent from the previous month to an average 166,094 pounds ($257,200), the mortgage unit of Lloyds Banking Group Plc said in a statement in London today. That’s the highest since 2010. From a year earlier, values rose 3.6 percent.
In Asia, China’s export growth unexpectedly accelerated in April even as shipments to the U.S. and Europe fell, spurring Bank of America Corp. and Mizuho Securities Co. analysts to say the figures were inflated by fake reports.
The 14.7 percent increase, reported by the General Administration of Customs in Beijing today, was led by a 57.2 percent jump in shipments to Hong Kong that highlighted suspicions of false transactions used to mask capital flows into China. A customs spokesman said last month that the agency would investigate the “extraordinary” gain in trade with Hong Kong.
New Zealand Reserve Bank Governor Graeme Wheeler said the central bank sold the kiwi dollar and can do so again to protect economic growth.
Faster-growing markets in Asia and the U.S. are helping German companies offset the effects of the sovereign debt crisis in Europe.
Beiersdorf AG, the maker of Nivea skin cream, reported first quarter profit on May 2 that exceeded analyst estimates. Chief Executive Officer Stefan Heidenreich is investing in China, Brazil, Russia and other growing economies, where the company says it gets almost 50 percent of revenue.
At the same time, Germany’s Siemens AG, Europe’s largest engineering company, cut its full-year forecast on May 2 after quarterly earnings missed analyst estimates.
There’s “widely distributed uncertainty about the development of the economy,” VDMA machine-makers’ association president Ralph Wiechers said on May 2, after reporting that plant and machinery orders fell 4 percent on the year in May.
“The outlook for later this year is still hanging in the balance as the global economy could slow somewhat,” said Andreas Rees, chief Germany economist at UniCredit Research in Munich. “Still, we should have growth in the first and second quarters.”