Tags: Weather Prompts Surprise German Industry Output Drop

Weather Prompts Surprise German Industry Output Drop

Tuesday, 08 Feb 2011 10:42 AM

German industrial output fell unexpectedly in December as the worst winter weather in years triggered a collapse in construction but the data failed to dampen growth expectations for Europe's biggest economy.

Forward-looking business and sentiment surveys have climbed to multi-year highs, suggesting buoyant exports are driving growth across the German economy and fanning hopes that spending by its consumers could help lift the wider euro zone.

"Under the blanket of snow, there still slumbers a lot of growth potential," said ING economist Carsten Brzeski.

"With high backlogs, record high production expectations and improving investment plans, all the ingredients are there to continue the success story of the last two years."

France, Germany's biggest single trading partner, is expected to grow 0.8 percent in the first quarter of 2010, its fastest clip in seven years, the French central bank said on Tuesday in a surprisingly upbeat forecast.

Germany's economy ministry said December industrial output had sunk by 1.5 percent on the month in seasonally adjusted terms, well below the 0.3 percent increase forecast in a Reuters poll and putting pressure on the euro.

Construction activity fell by nearly a quarter, the biggest monthly drop since records began in 2000.

The ministry said the fall in production had been strongly influenced by December's Arctic weather conditions.

"The economically important manufacturing sector is still pointing towards an upwards trend, however, and retained in the final quarter of the year its growth rate from the previous period (the third quarter)," it said in a statement.

Separately, employers from the mechanical and electrical engineering sectors said on Tuesday they expect to increase production and create jobs in the early months of this year, in a statement released by their association Gesamtmetall.

"In all likelihood, we will have fully recovered from the global economic crisis by the end of 2011," said Gesamtmetall economist Michael Stahl.

GROWTH POTENTIAL

A statistician at the Federal Statistics Office in Wiesbaden said December's plunge in building activity was the worst since German reunification in 1990.

Construction activity accounts for only about 4 percent of gross domestic product, whereas manufacturers like Siemens, BASF and Volkswagen make up roughly a quarter of Germany's economy.

Taking November into account to smooth out volatility, overall industry output including construction was flat in the last two months of 2010 versus the combined September-October period, suggesting fourth quarter growth was driven largely by the services sector.

Other data on Monday showed traditionally volatile industry orders slid far more than expected in Germany in December, giving back much of November's gains, but leaving a sizeable backlog of orders booked to fuel future output.

Detailed German GDP figures are due on Feb. 24, with first estimates for the final quarter showing growth of only 0.5 percent due to the harsh weather.

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German industrial output fell unexpectedly in December as the worst winter weather in years triggered a collapse in construction but the data failed to dampen growth expectations for Europe's biggest economy. Forward-looking business and sentiment surveys have climbed to...
Weather Prompts Surprise German Industry Output Drop
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2011-42-08
Tuesday, 08 Feb 2011 10:42 AM
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