German Industrial Output Slumps Again

Industrial orders fell 6.1% in October.

German industrial output slumped again in October, falling a much worse-than-expected 2.1% from September, economy ministry figures showed on Dec. 5.

Analysts had expected a drop of 1.5%, after production contracted by 3.3% in September on a monthly basis. On a 12-month basis, output plunged in October by 3.8%, the worst result since February 2002, Capital Economics economist Jennifer McKeown noted.

The ministry warned in a statement that it was likely that "production (will) continue to fall in the coming months," owing in particular to weak industrial orders, which tumbled 6.1% in October.

A breakdown of the preliminary data showed construction activity contracted 3% and industrial activity 2.2%.

Germany, which is also the world's leading exporter, has hit a wall owing to falling global demand for industrial goods such as machine tools, and autos, two of its main strengths. "The earlier driver of the recovery is now acting as a heavy drag on the economy," McKeown said.

Traditionally thrifty German consumers gave German output a small boost in the third quarter but did not make up for losses in exports and investment. Business sentiment surveys indicate that the worst could well lie ahead.

The widely-watched Ifo survey found that business confidence had fallen in November to its lowest level in more than 15 years, suggesting that Germany could be in for a long recession. Data has also indicated that after contracting in the second and third quarters, thereby meeting the technical definition of recession, the German economy was set to shrink further in the fourth quarter of 2008.

Copyright Agence France-Presse, 2008

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