German industrial output slumps in September 2011

Nov 07, 2011 12:00 AM

German industrial output fell in September at its sharpest rate since February 2009, fuelling concerns that Europe's stuttering growth engine could go into reverse before the end of 2011 as an abrupt slowdown abroad eats into demand for its exports. Economy ministry figures showed production fell 2.7 % from the previous month, missing expectations for a 0.5 % drop in an economist poll.
“We expect Germany's industrial sector to contract (in the fourth quarter) on the back of the euro zone economy moving into recession,” Aline Schuiling, an economist at ABN Amro said, “Although domestic demand in Germany should be more resilient... total GDP will probably contract... as well.”

The euro zone's sovereign debt crisis has led many German companies to warn of slowing demand, and recent data has added to signs that Europe's dominant economy can no longer be relied on to underpin growth in the region. Production in Germany, a best-in-class performer during the recovery from the 2008-2009 financial crisis, looked set to slow further as industrial orders slumped the most since January 2009 due to sharply weaker euro zone demand, data showed.
“We can expect slower momentum in production ahead, given the industry order intake for the coming months,” the economy ministry said.

Bleak outlook
Bus and truck maker MAN said earlier weaker demand from Europe -- likely to remain muted throughout the year -- made it cut production by 3,000 vehicles from just over 20,000 in the third quarter as order growth slowed. The euro area could subside into a mild recession in the latter part of this year, the European Central Bank said earlier as it surprisingly cut interest rates in a bid to support the struggling euro area.
Jennifer McKeown, an analyst at Capital Economics said: “Germany's bleak economic outlook will make it even less likely to support the euro zone's most indebted economies in the future, adding to the risk of a euro-zone break-up.”

Data showed manufacturing output was down 3.0 % with a 4.7 % decline in capital goods, while construction output fell 0.8 % and energy production was down 0.7 %.

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