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German Industrial Production Disappoints in May

July 7, 2016
The domestic economy is booming,  but the former growth engines -- exports and industrial production -- are weakening.

Industrial production in Germany contracted more than expected in May, official data showed Thursday, suggesting that growth in Europe's biggest economy is slowing, analysts said.

According to regular monthly data compiled by the economy ministry, industrial output shrank by 1.3% in May, much more sharply than expected.

Analysts surveyed by Factset had been penciling in a decline of just 0.1% in May after output rose by 0.5% in April.

The drop was driven by falling activity in the key manufacturing and construction sectors, while energy output jumped, the data showed.

Analysts said the figures pointed to a slowdown in economic activity in the second quarter after Germany's robust performance at the start of the year.

The ministry pointed out that the timing of public holidays and severe bad weather will have dragged down the headline figure.

Just a day earlier, economy ministry data had shown that factory orders stagnated in May.

But the ministry insisted that industrial production "should resume its moderate upwards trend", pointing to improving mood among business leaders.

Analysts were not so sure.

"While the domestic economy is booming, the former growth engines -- exports and industrial production -- are weakening," said Carsten Brzeski, chief economist at ING Bank.

BayernLB economist Christiane von Berg said she did not expect "a deep cooling of the economy."

But following Britain's shock vote to leave the European Union, BayernLB expected only "moderate" economic momentum over the rest of 2016, "which won't be able to reach the levels of the first quarter," von Berg said.

Europe's biggest economy grew by 0.7% in the first quarter, but observers are concerned that fallout from so-called "Brexit" and weakness in emerging economies could dampen its performance in subsequent quarters.

The output data "are further evidence that the German economy has lost considerable momentum after its strong start to the year, and it will probably have achieved virtually no growth in the second quarter," said Commerzbank economist Ralph Solveen.

Copyright Agence France-Presse, 2016

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