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German industrial output surprises with 0.3% fall

German industrial production dropped unexpectedly in November and the trade surplus was below forecasts for that month, official data showed Friday, a sign that Europe’s largest economy is struggling to gain momentum after a weak third quarter.

But industrial activity should gather speed over the coming months, the economics ministry said Friday. “Manufacturing orders are picking up again and business sentiment is brightening, too,” it said.

Total industrial production, adjusted for seasonal swings and calendar effects, dropped 0.3% in November from the previous month, falling short of a median forecast rise of 0.5% in a Wall Street Journal poll of economists. Manufacturing production dropped 0.8% from October, but construction output surged 1.6%.

The economics ministry said that weak demand from developing economies has kept a lid on German industrial activity. Industrial output was up just 0.1% from November 2014, in calendar-adjusted terms.

“Looking ahead, ongoing uncertainties in China, a possible slowdown in the U.S. economy and, more generally, the negative effects from record-low oil prices indicate that a quick rebound in industrial production is anything but certain,” said Carsten Brzeski, an economist at ING in Frankfurt.

Industrial production in neighboring France was weak, too. The Insee statistics agency said Friday that industrial output in the eurozone’s second-largest economy fell 0.9% in November from October, even as manufacturing output rose 0.4%. Mining output fell 6.7% in November.

The Federal Statistical Office, in a separate publication, said that Germany’s adjusted trade surplus slipped to EUR19.7 billion ($21.4 billion) in November from EUR20.6 billion in October. A 0.4% monthly rise in exports was outstripped by a 1.6% jump in imports. Economists polled by The Wall Street Journal had forecast a trade surplus of EUR20.3 billion for November.

Germany’s exporters have been feeling the pinch from weak orders from China, Russia and other developing economies. But a lower euro exchange rate has partly cushioned this effect, because it makes eurozone goods more competitive outside the region.

“We expect only modest growth in the fourth quarter, but improving survey data and rising manufacturing orders point to a pickup in economic activity in early 2016,” said Clemente De Lucia, an economist at BNP Paribas in London. Economists at the French bank forecast that Germany’s quarterly growth rate will double to 0.4% in the first quarter from just 0.2% in the final quarter of 2015.

Source: MarketWatch

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