German Industrial Output Rebounds in Sign of Recovery

German industrial production rose in June, adding to signs that growth in Europe’s largest economy accelerated in the second quarter.

Output increased 2.4 percent from May, when it dropped a revised 0.8 percent, the Economy Ministry in Berlin said today. Economists forecast a gain of 0.3 percent, according to the median of 41 estimates in a Bloomberg News survey. Production climbed 2 percent from a year earlier when adjusted for working days.

Germany, which faces parliamentary elections next month, is benefiting from a nascent recovery in the 17-nation euro region, its biggest trading partner. The nation’s factory orders surged the most in eight months in June, boosted in part by contracts signed at the Paris Air Show, the ministry said yesterday. Manufacturing in the euro region expanded last month for the first time in two years, according to a survey of purchasing managers by London-based Markit Economics.

“The crisis is slowly ebbing,” said Thilo Heidrich, an economist at Deutsche Postbank AG in Bonn. “Hard economic data are following broad-based improvements in sentiment. That supports the gradual economic recovery we expect in Germany and the euro area in the remainder of the year.”

German manufacturing output increased 2.2 percent in June, with production of investment goods jumping 4.1 percent, today’s report showed. Construction rose 1.6, while energy output advanced 5 percent.

GDP Reports

“Industrial production has passed its weak phase,” the Economy Ministry said in the statement. “Current sentiment indicators clearly indicate positive progress in manufacturing.”

European Central Bank President Mario Draghi said last week that a “tentative” stabilization is under way in the euro region after at least six quarters of contraction through March.

German and euro-area gross domestic product data for the second quarter will be released on Aug. 14. The currency bloc’s economy probably stagnated in the three months through June and will expand 0.1 percent in the current quarter, according to a Bloomberg survey of economists.

Chancellor Angela Merkel will seek a third term as German leader on Sept. 22 on the strength of shielding her country from the worst effects of the region’s debt crisis. Her Christian Union bloc is leading with about 40 percent support among voters to 25 percent for the Social Democrats, according to an Emnid poll.

Signs of Weakness

The Bundesbank said last month that it’s seeing signs of a slowdown in the German economy after growth expanded “strongly” in the second quarter. The Frankfurt-based central bank in June cut its 2013 growth outlook to 0.3 percent from 0.4 percent.

China, Germany’s third-biggest trading partner, has seen growth cool for the past two quarters. Lanxess AG lowered its 2014 profit forecast yesterday as the chemical maker said it sees no sign of a pick up in the second half of the year. Salzgitter AG, Germany’s second-largest steelmaker, said on Aug. 5 it expects a pretax loss this year because Europe’s crisis is weighing on demand.

Europe is still showing signs of recovery that may boost consumption of German goods. U.K. industrial production increased more than forecast in June. European countries accounted for 69 percent of German exports last year, according to the Federal Statistics Office in Wiesbaden.

Factory Orders

Growth has accelerated in the U.S., the destination for 12 percent of Germany’s shipments in 2012. The economy expanded at a 1.7 percent annualized rate from April through June after a 1.1 percent pace in the first quarter, the Commerce Department said July 31. German exports probably rebounded in June from a slump in May, a Bloomberg survey shows before data tomorrow.

German factory orders, an indicator of future production, jumped 3.8 percent in June from the prior month. Investment-goods orders from within the euro area surged 20.2 percent, the most since June 2007, as pan-European planemaker Airbus SAS, a unit of European Aeronautic, Defence & Space Co., booked orders for 466 planes worth $69 billion at the Paris Air Show.

“Taking a glimpse into the second half of this year, we think that the overall positive momentum will continue,” said Andreas Rees, chief German economist at UniCredit Bank AG in Munich. “Increasing Chinese headwinds will be compensated for by impulses from the U.S. and especially from the euro zone as indicated by recent business sentiment surveys and already piecemeal hard data.”

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