German Industry Output Drops Most Since 2009 as Economy Wobbles
2014-10-07 06:00:00.38 GMT
By Jana Randow
Oct. 7 (Bloomberg) -- German industrial production fell
more than economists forecast in August in the latest sign that
the outlook for Europe’s largest economy is deteriorating.
Production, adjusted for seasonal swings, dropped 4 percent
from July, when it expanded 1.6 percent, the Economy Ministry in
Berlin said today. That’s the biggest decline since January 2009
and compares with a median estimate of 1.5 percent in a
Bloomberg News survey.
Germany’s economy is losing steam as sluggish growth in the
euro area, its largest export market, and political tension with
Russia weigh on confidence. The European Central Bank has
enacted unprecedented stimulus to sustain the regional recovery
while calling on governments to press ahead with structural
reforms.
“The German economy will develop rather weakly in the
second half of this year,” said Ralph Solveen, head of economic
research at Commerzbank AG in Frankfurt, who forecasts third-
quarter gross domestic product will be little changed. “And in
light of the weak trend in orders, we would not expect a great
deal for the final quarter of this year.”
Output of investment goods slumped 8.8 percent in August
and intermediate goods dropped 1.9 percent, today’s report
showed. Consumer-goods production fell 0.4 percent and
construction slid 2 percent. Only energy output rose, climbing
0.3 percent.
School Holidays
While the volatility of the data was exacerbated by the
timing of the German school holidays this year, it still adds to
evidence that the economy is losing momentum after shrinking in
the second quarter.
Factory orders plunged 5.7 percent in August, also the most
since 2009, data showed yesterday. German manufacturing shrank
in September, with new orders falling at the fastest pace since
2012, according to a survey of purchasing managers. Business
confidence as measured by the Ifo research institute fell to the
lowest in almost 1 1/2 years, while unemployment increased for a
second month.
MAN SE, Europe’s third-largest truck manufacturer, said on
Sept. 25 that operating profit, revenue and sales volume at the
truck and bus division will be “significantly below” last
year’s level, reflecting weaker demand in markets including
Europe and Russia.
“The industrial economy is going through a weak phase,”
the ministry said in a statement. “The third quarter as a whole
is set for soft output.”
The International Monetary Fund will cut its German growth
forecasts for this year and next to about 1.5 percent from 1.9
percent and 1.7 percent, respectively, according to Spiegel
magazine. The Washington-based lender will publish the data,
together with updated projections for the euro area, later
today.
The 18-nation currency region is still on track for a
“modest economic expansion in the second half,” even though
risks remain on the downside, ECB President Mario Draghi said
last week. The Governing Council kept interest rates unchanged
at record lows and said it will start buying covered bonds and
asset-backed securities to support the economy.
For Related News and Information:
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--With assistance from Kristian Siedenburg in Vienna.
To contact the reporter on this story:
Jana Randow in Frankfurt at +49-69-92041-206 or
jrandow@bloomberg.net
To contact the editors responsible for this story:
Fergal O’Brien at +44-20-7330-7152 or
fobrien@bloomberg.net
Zoe Schneeweiss, Paul Gordon
2014-10-07 06:00:00.38 GMT
By Jana Randow
Oct. 7 (Bloomberg) -- German industrial production fell
more than economists forecast in August in the latest sign that
the outlook for Europe’s largest economy is deteriorating.
Production, adjusted for seasonal swings, dropped 4 percent
from July, when it expanded 1.6 percent, the Economy Ministry in
Berlin said today. That’s the biggest decline since January 2009
and compares with a median estimate of 1.5 percent in a
Bloomberg News survey.
Germany’s economy is losing steam as sluggish growth in the
euro area, its largest export market, and political tension with
Russia weigh on confidence. The European Central Bank has
enacted unprecedented stimulus to sustain the regional recovery
while calling on governments to press ahead with structural
reforms.
“The German economy will develop rather weakly in the
second half of this year,” said Ralph Solveen, head of economic
research at Commerzbank AG in Frankfurt, who forecasts third-
quarter gross domestic product will be little changed. “And in
light of the weak trend in orders, we would not expect a great
deal for the final quarter of this year.”
Output of investment goods slumped 8.8 percent in August
and intermediate goods dropped 1.9 percent, today’s report
showed. Consumer-goods production fell 0.4 percent and
construction slid 2 percent. Only energy output rose, climbing
0.3 percent.
School Holidays
While the volatility of the data was exacerbated by the
timing of the German school holidays this year, it still adds to
evidence that the economy is losing momentum after shrinking in
the second quarter.
Factory orders plunged 5.7 percent in August, also the most
since 2009, data showed yesterday. German manufacturing shrank
in September, with new orders falling at the fastest pace since
2012, according to a survey of purchasing managers. Business
confidence as measured by the Ifo research institute fell to the
lowest in almost 1 1/2 years, while unemployment increased for a
second month.
MAN SE, Europe’s third-largest truck manufacturer, said on
Sept. 25 that operating profit, revenue and sales volume at the
truck and bus division will be “significantly below” last
year’s level, reflecting weaker demand in markets including
Europe and Russia.
“The industrial economy is going through a weak phase,”
the ministry said in a statement. “The third quarter as a whole
is set for soft output.”
The International Monetary Fund will cut its German growth
forecasts for this year and next to about 1.5 percent from 1.9
percent and 1.7 percent, respectively, according to Spiegel
magazine. The Washington-based lender will publish the data,
together with updated projections for the euro area, later
today.
The 18-nation currency region is still on track for a
“modest economic expansion in the second half,” even though
risks remain on the downside, ECB President Mario Draghi said
last week. The Governing Council kept interest rates unchanged
at record lows and said it will start buying covered bonds and
asset-backed securities to support the economy.
For Related News and Information:
German Factory Orders Slump Most Since 2009 as Euro Area Falters
NSN ND0HHJ6JTSEM <GO>
Economic Malaise Frustrates Draghi as ECB Readies New Stimulus
NSN NCV74K6JIJUT <GO>
Top Forecaster Sees Weaker Euro on ECB Embracing QE: Currencies
NSN ND0PVZ6JIJUO <GO>
Search for central bank stories: NSE MONETARY POLICY <GO>
Stories on ECB interest rates: STNI ECBACTION <GO>
Stories related to the ECB: NI ECB <GO>
Euro-region economic stories: TNI ECO EUROP <GO>
--With assistance from Kristian Siedenburg in Vienna.
To contact the reporter on this story:
Jana Randow in Frankfurt at +49-69-92041-206 or
jrandow@bloomberg.net
To contact the editors responsible for this story:
Fergal O’Brien at +44-20-7330-7152 or
fobrien@bloomberg.net
Zoe Schneeweiss, Paul Gordon