Bloomberg News

German Industrial Output Drops in Sign Growth Stalling: Economy

January 09, 2012

Jan. 9 (Bloomberg) -- German industrial output declined in November as factories produced fewer investment and consumer goods, adding to signs that growth in Europe’s largest economy may have stalled.

Production fell 0.6 percent from October, when it rose 0.8 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.5 percent drop, according to the median of 30 estimates in a Bloomberg News survey. In the year, production rose 3.6 percent when adjusted for working days.

Germany’s economy is cooling as the sovereign debt crisis combines with slower global growth to damp demand for its exports. It may still avoid recession. Unemployment at a two- decade low is helping to bolster consumer sentiment, service industries expanded in December and business confidence unexpectedly rose for a second month.

“Recent data does show that the economy will probably contract in the fourth quarter, but that does not mean it’s heading for a recession,” said Carsten Brzeski, an economist at ING Group in Brussels. “Of course it will be affected by the crisis and don’t underestimate the German winter, which will shut down the construction sector. But by the middle of this year at the latest it should be motoring ahead again.”

The Stoxx Europe 600 Index was little changed at 12:35 p.m. in London, while Standard & Poor’s 500 Index futures swung between gains and losses. The euro rebounded from its lowest level against the dollar since September 2010 as German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin to drive forward their agenda for stricter budget rules in the 17-nation euro zone.

Construction Surge

German production of investment goods fell 1 percent in November and consumer goods production declined 0.7 percent, today’s report showed. Energy output eased 0.4 percent, while construction activity jumped 4.5 percent.

Germany had its fifth-warmest December on record, according weather bureau DWD, boosting construction.

“Normally, cold weather means we shut down plants for a time and get on with maintenance,” HeidelbergCement Chief Executive Officer Bernd Scheifele said last week. “There’s only been a few years when we have been able to keep cement production running for an entire year.”

Scheifele in December predicted a “difficult” business environment in 2012 because of rising energy costs and the debt crisis. Companies will withhold investments until the problems in Italy and Greece are solved, he told Rhein-Neckar-Zeitung.

Factory Orders

German factory orders dropped the most in almost three years in November, with orders from both the euro region and outside the currency union slumping, the Economy Ministry said on Jan. 6.

The International Monetary Fund will probably cut its forecast for global growth, Managing Director Christine Lagarde said the same day. German growth will slow to 0.6 percent in 2012 from 3 percent last year before recovering to 1.8 percent in 2013, the Bundesbank predicted on Dec. 19.

Australian retail sales unexpectedly stalled in November, ending four months of gains and pushing the nation’s currency to a one-week low as traders increased bets that the central bank will cut interest rates.

China’s lending and money supply growth in December exceeded economists’ estimates, signaling monetary conditions may be easing as the nation’s central bank said it must be prepared for possible shocks from the U.S. and Europe.

U.S. Demand

Some German companies are counting on demand for their products outside Europe. Exports rose 2.5 percent in November, almost compensating for their 2.9 percent decline in October, the Federal Statistics Office said today.

Daimler AG’s Mercedes-Benz is targeting higher car deliveries in 2012 after selling a record number of vehicles last year, Chief Executive Officer Dieter Zetsche said Jan. 5. Rival Porsche SE anticipates U.S. sales to rise to more than 30,000 cars next year on demand for the revamped 911 sports car.

U.S. consumer borrowing probably rose by $7 billion in November, compared with a $7.64 billion gain the previous month, according to the median estimate of economists surveyed before the Federal Reserve releases the figures later today.

Annalisa Piazza, an economist at Newedge Group in London, said she expects “further weakness” in German industrial output in coming months. “That said, business confidence indicators have been relatively resilient. As such, we rule out that the German economy will fall into a deep recession any time soon.”

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

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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