Autos Drive German Industrial Output Higher in May

Foreign demand for autos increase 24%

Roaring auto output pushed German industrial production higher in May by the biggest margin since August 1993, official data showed on July 8, signaling the country's deep recession might be near an end.

The economy ministry said overall output in Europe's biggest economy jumped by 3.7% in May from the previous month and added: "Industrial production may have passed the trough."

The outlook was was brighter than in April, when production fell by a revised 2.6%.

A breakdown of the output data showed that manufacturing of capital goods, which includes autos, leapt by 8.3% in May on the month, in part thanks to a government cash-for-clunkers scheme that pays drivers 2,500 euros (US$3,450) to scrap an old car for a new one. But "foreign demand for German cars was (also) a key driver as had already been reflected by yesterday's new orders data," UniCredit economist Andreas Rees noted.

Commerzbank's Ralf Solveen also underscored stronger foreign demand for autos after the sector posted a whopping 24.2% gain on the month, and said it "is presumably not just due to the government incentives."

On a 12-month basis, overall adjusted industrial output nonetheless fell by 17.9%, the data showed, a sign of how much the economy has shrunk in a year.

But the monthly rise was a second piece of good news from the economy ministry, which said on July 7 that industrial orders had leapt higher in May, suggesting the upward momentum in output could be maintained.

"The recession in the industrial sector is bottoming out," ING economist Carsten Brzeski said.

Rees added that "after the summer break, the odds are rising that the German economy will manage a comeback."

Copyright Agence France-Presse, 2009

TAGS: Trade
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