German Industrial Output Unexpectedly Drops Amid China Risks

  • Output fell 1.1% in September versus estimated 0.5% increase
  • German industry in `temporary weak phase,' ministry says

Deep Dive: German Factory Orders, Two-Year Yields

German industrial production unexpectedly dropped in September as a slowdown in China and other emerging markets took its toll.

Output, adjusted for seasonal swings and inflation, fell 1.1 percent from August, when it declined a revised 0.6 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.

Germany is grappling with a slowdown in China and other emerging markets, key destinations for its exports. With factory orders from countries outside the 19-nation euro region down 8.6 percent in the third quarter, the focus is shifting to strengthening domestic spending fueled by pent-up investment demand and consumption.

“Disappointing industrial production doesn’t bode well for German third-quarter gross domestic product,” said Carsten Brzeski, chief economist at ING-Diba AG in Frankfurt. “The Chinese and emerging-markets slowdowns are also leaving their marks on the euro zone’s largest economy.”

The euro was down 0.1 percent at 8:25 a.m. Frankfurt time and traded at $1.0874.

Industrial production fell 0.3 percent in the third quarter from the previous period as manufacturing output dropped. In September, factory production declined 1.4 percent from the previous month.

Third-quarter GDP data are due to be published on Nov. 13.

The Economy Ministry said Thursday that manufacturing orders unexpectedly retreated 1.7 percent in September, marking the third consecutive decline. Business confidence as measured by the Ifo institute fell in October -- the first decline in four months.

“German industry is feeling light headwinds from the global economy, especially because of the slowdowns in some larger emerging markets,” the ministry said in a statement. “Companies have reined in production somewhat in light of the modest development of manufacturing orders in the third quarter. Business confidence in the industry remains good and speaks in favor of a temporary weak phase.”

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