Nov. 7 (Bloomberg) -- German industrial production fell three times more than economists forecast in September as Europe’s debt crisis damped confidence and growth, threatening to drag Europe’s largest economy into recession.
Output dropped 2.7 percent from August, when it fell 0.4 percent, the Economy Ministry in Berlin said today. That’s the biggest drop since January 2009. Economists forecast a 0.9 percent decline, according to the median of 37 estimates in a Bloomberg News survey. In the year, production rose 5.4 percent when adjusted for working days.
The two-year-old debt crisis is starting to curb company investment and spending as governments struggle to find a solution and financial markets tumble. German factory orders unexpectedly slumped 4.3 percent in September, led by a 12.1 percent plunge in demand from other euro-area countries. The European Central Bank cut interest rates on Nov. 3, saying the 17-nation euro region is moving toward a “mild recession.”
“The longer the uncertainty about the debt crisis continues, the risk grows that it turns into a global downturn,” said Aline Schuiling, senior economist at ABN Amro in Amsterdam. Still, Germany’s economic fundamentals should allow it to “just about escape from a recession,” she said.
Production of consumer goods rose 1.1 percent in September, today’s report showed. Investment goods production sank 4.7 percent and construction activity declined 0.8 percent.
The Economy Ministry, which revised up August output from an initially reported 1 percent drop, said September production was damped by late summer holidays. Overall, production rose 1.7 percent in the third quarter from the second, it said.
“Still, looking at factory orders, production can be expected to be subdued in coming months,” the ministry said.
While Germany’s Bundesbank on Oct. 17 predicted “strong” growth in the third quarter due to a rebound in industrial production and private consumption, it said the outlook had deteriorated.
Beiersdorf AG, the maker of Nivea skin creams, said on Nov. 3 that third-quarter profit fell 25 percent as costs rose and Europeans bought fewer personal-care products.
Some German companies have so far been spared the brunt of Europe’s debt crisis by selling to faster-growing emerging markets like Asia.
HeidelbergCement AG, the world’s third-largest maker of cement, last week reported third-quarter profit that beat analyst estimates as sales to countries such as Indonesia grew faster than anticipated.
“The economy has definitely taken a bit of a hit as a result of the debt crisis,” said Alexander Krueger, chief economist at Bankhaus Kampe KG in Dusseldorf. “But it isn’t fundamentally weak and reasonably robust growth ought to continue if this uncertainty is cleared up.”
Germany’s top economic institutes on Oct. 13 predicted growth will slow to 0.8 percent next year from 2.9 percent in 2011.
--With assistance from Dermot Doherty in Geneva , Kristian Siedenburg in Vienna and Andreas Cremer in Berlin. Editors: Matthew Brockett, Simone Meier
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