German industrial output fell 1.8 percent during October, mainly due to weaker production of machinery and cars, preliminary data showed Tuesday.
The fall followed a healthy 3.1 percent increase in September, revised up from an initial estimate of 2.7 percent, the Economy Ministry said.
Economists had expected a 1 percent increase in October, but portrayed the drop as a temporary setback.
It was led by a 3.5 percent decline in production of so-called investment goods such as machinery. The ministry said machinery production was down 7.6 percent, while production of cars and car parts fell by 3.3 percent.
Despite the overall drop in October, "the trend in industrial production is still clearly upward," the Economy Ministry said, noting the previous month's sharp gains.
The data came a day after the ministry reported that German industrial orders declined by 2.1 percent in October, also defying economists' expectations of a rise.
The weakness "largely reflects the waning effect from fiscal measures such as car-scrappage schemes," said Frederik Ducrozet, an economist at Calyon Capital Markets Research. Germany's car-scrapping bonus plan ended in early September.
However, the overall picture is improving and "demand from abroad remains firm," Ducrozet wrote in a research note.
He predicted a recovery of both industrial orders and production in November and quarter-on-quarter gross domestic product growth of 0.7 percent in the current quarter — slowing to about 0.3 percent in next year's first quarter.
The German economy, Europe's biggest, emerged from a deep recession in this year's second quarter, growing by 0.4 percent. Growth accelerated to 0.7 percent in the third quarter.
However, unemployment is expected to rise over the coming months and a separate report released Tuesday showed a rise in the number of corporate bankruptcies in September.
The Federal Statistical Office said courts received 2,910 bankruptcy protection filings from companies in September — a 17.4 percent increase over the same month last year.
Over the first nine months of this year, 24,717 companies filed for bankruptcy — an 11.2 percent increase over the same period in 2008.
The statistical office says it expects corporate bankruptcies this year to total more than 34,000, up from 29,291 last year.
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