German Industrial Output Rises Robustly In May
First Published Friday, 6th July 2012 11:43 am - © 2012 Dow Jones
--Chances improved for stable 2Q in German industry, economy ministry says
--Data suggest German manufacturing isn't being overly affected by debt crisis, analysts say
--Germany won't return to robust growth until market tensions brought under control, analysts say
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By Tom Fairless
German industrial output rose robustly in May, data from the country's economics ministry showed Friday, beating analysts' expectations and suggesting that the euro zone's largest economy will continue to prop up growth in the second quarter.
Output from Germany's key industrial sector rose 1.6% on the month in adjusted terms, the ministry reported, clearly above the consensus forecast for an increase of just 0.4%. The ministry also revised up slightly its estimate for April, to a decline of 2.1% rather than an originally reported 2.2% drop.
"Overall, the chances for a stable second quarter in the industrial sector have improved despite existing risks from the euro area," the ministry said in a statement.
Friday's data suggest that "renewed market tensions and global slowdown did not exceedingly affect German manufacturing up until May," said Christian Schulz, an economist with Berenberg Bank in London.
That picture was reinforced by data released by the ministry Thursday showing a 0.6% increase in new manufacturing orders in May from the previous month, a stronger clip than the 0.2% projected by analysts. The improvement was driven by stronger demand from within the euro zone.
Taken together, recent data "still argue against an imminent severe deterioration in activity" for German industry, said Alexander Koch, an economist at UniCredit in Munich.
Among major categories, construction output increased 3.1% on the month after a steep 5.5% drop in April, while manufacturing output rose 1.8% on the month after falling 2.3% in April, the ministry said.
Still, industrial output was flat on the year in May in adjusted terms, and fell 6.6% from a year earlier without adjustments, the ministry said.
"Given the volatility of the data, another monthly fall in June would be no surprise," said Jonathan Loynes, an economist at Capital Economics in London.
Other recent data have signalled that Germany's economy is slowing. Earlier this week, a survey of purchasing executives showed German manufacturing activity slowing at its fastest rate in three years in June, while Ifo's closely watched business sentiment survey hit a two-year low last month.
Even Germany's robust labor market is showing signs of strain, with the number of German jobless claims rising by 7,000 last month, compared with expectations that it would remain unchanged.
On Thursday, the European Central Bank cut its main interest rate to a historic low of 0.75%, seeking to provide a degree of relief to the euro zone's faltering economy amid signs that inflationary pressures are fading.
Germany is only likely to return to robust economic growth once financial markets tensions are brought under control, Berenberg's Mr. Schulz warned, adding that "falling investment and net exports are likely to drag down overall growth" over the summer.
Nevertheless, rising enthusiasm for German real estate and resilient consumption "may counterbalance some of the inevitable weakness in other sectors," he added.
Write to Tom Fairless at firstname.lastname@example.org