German Industrial Production Surged Most in More Than a Year
September 07, 2011, 6:28 AM EDTBy Jana Randow
(Updates with euro in fifth paragraph.)
Sept. 7 (Bloomberg) -- Industrial production in Germany surged the most in more than a year in July as late school holidays boosted factory output.
Production jumped 4 percent from June, when it dropped 1 percent, the Economy Ministry in Berlin said today. That’s the biggest gain since March 2010. Economists had forecast an increase of 0.5 percent, the median of 37 estimates in a Bloomberg News survey showed. In the year, output rose 10.1 percent when adjusted for working days.
The German economy, Europe’s largest, will expand “in the region of 3 percent” this year, the Bundesbank reiterated last month after growth slowed to a near standstill in the second quarter. While unemployment fell for a 26th month in August, confidence among consumers, investors and businesses worsened as the region’s debt crisis threatened to derail the recovery.
“German companies have a high backlog of orders that will keep production going,” said Andreas Rees, chief German economist at UniCredit MIB in Munich, who forecasts growth of 0.5 percent in the third quarter. “I don’t see companies canceling orders to a large extent but if financial market uncertainty continues, some firms may postpone investments.”
The euro was little changed after the release, trading at $1.4076 at 12:04 p.m., up 0.6 percent on the day.
Production of consumer goods jumped 2.5 percent in July from the previous month, when it fell 1.1 percent, today’s report showed. Output of durable consumer goods surged 15.4 percent and production of investment goods rose 7.5 percent. Intermediate goods output increased 2.3 percent.
‘Positive’ Outlook
Output gains were “exaggerated” by the fact that fewer school holidays fell in July, the ministry said. The outlook for industrial production remains “positive,” though risks have increased, it said.
Volkswagen AG’s Audi division is hiring staff to increase car production, including a 57 percent capacity boost for the 69,600-euro ($97,837) A8 flagship sedan. German rivals Bayerische Motoren Werke AG and Daimler AG are adding shifts, shortening breaks and building new factories to meet demand.
Companies may struggle to maintain their output growth as global demand shows signs of faltering.
German factory orders fell more than economists expected in July, led by a drop in export demand. Manufacturing slumped in Europe and Asia last month, while recession fears in the U.S., the world’s largest economy, have prompted calls for the Federal Reserve to embark on another round of quantitative easing.
German Slowdown
In Germany, economic growth weakened to 0.1 percent in the second quarter from 1.3 percent in the previous three months as imports exceeded exports and households cut spending. The 17- member euro-region economy grew 0.2 percent in that period.
“Low growth in the second quarter taken by itself is no evidence yet that the German economy has lost robustness due to weaker foreign demand and increased uncertainty,” the Bundesbank said on Aug. 22.
ThyssenKrupp AG, Germany’s biggest steelmaker, on Aug. 12 posted fiscal third-quarter earnings that missed analyst estimates as European demand weakened. Siemens AG and BASF AG, two of Germany’s largest companies, reported second-quarter earnings that fell short of analysts’ expectations.
“The upswing in industry has lost considerable momentum since the start of the year,” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt. “This makes much lower growth likely for the overall economy in the second half of the year compared to the first.”
--Editors: Simone Meier, Matthew Brockett
To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
