Bloomberg News

German Industrial Production Unexpectedly Declined in April

June 08, 2011

June 8 (Bloomberg) -- German industrial production unexpectedly declined for the first time in four months in April, led by a drop in construction output.

Production fell 0.6 percent from March, when it rose a revised 1.2 percent, the Economy Ministry in Berlin said today. Economists had forecast a gain of 0.2 percent, the median of 36 estimates in a Bloomberg News survey showed. In the year, production rose 9.6 percent when adjusted for working days.

The German economy, Europe’s largest, may lose some momentum after expanding at the fastest pace in almost a year in the first quarter, with surging energy costs sapping companies’ spending power and European governments toughening austerity measures. German manufacturing growth and investor confidence weakened last month and exports dropped more than economists forecast in April.

“While the boom may have peaked, the economy is still powering ahead,” said Tobias Blattner, an economist at Daiwa Capital Markets in London. “The domestic economy will remain fairly strong, with exports the main growth driver.”

Construction output fell 5.7 percent in April from March, when it advanced 5.5 percent, today’s report showed. Manufacturing declined 0.6 percent, led by a 1.5 percent drop in investment-goods production. The ministry revised up the gain in overall March industrial output from 0.7 percent.

The production trend continues to “point upward despite a slight cooling at the fringes,” the ministry said in the statement. It forecast a “slightly calmer pace of expansion” after “a very strong production pace in recent months.”

First-Quarter Growth

Construction, company investment and export growth powered Germany’s 1.5 percent economic expansion in the first quarter. Audi, Volkswagen AG’s luxury brand, said last month it will add shifts to ease delivery waiting time on increasing global demand.

Economic growth may slow to 2.6 percent this year from a record 3.6 percent in 2010, the European Commission said on May 13. The economy of the 17-member euro region may grow 1.6 percent, the Brussels-based commission said.

A 37 percent increase in crude oil prices over the past year is putting pressure on companies to pass on higher costs to consumers just as governments from Ireland to Spain toughen spending cuts to fight the region’s debt crisis.

German growth will slow, said Ken Wattret, chief euro area economist at BNP Paribas in London. Still, this is “a moderation from exceptionally strong levels, rather than the beginnings of a double dip,” he said.

--With assistance from Kristian Siedenburg in Budapest. Editors: Simone Meier, Matthew Brockett

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net.

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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