By Frances Robinson
Dec. 8 (Bloomberg) -- German industrial output unexpectedly fell for the first time in three months in October, led by a drop in production of energy and of investment goods such as machinery.
Output decreased 1.8 percent from September, when it advanced 3.1 percent, the Economy Ministry in Berlin said today. Economists forecast a 1 percent gain, according to the median of 38 estimates in a Bloomberg survey. From a year earlier, production declined 12.4 percent when adjusted for the number of work days.
Germany’s recovery from its worst recession since World War II may slow as the impact of government stimulus measures, such as the now-expired cash-for-clunkers program, wane and a stronger euro damps exports. Factory orders unexpectedly fell for the first time in eight months in October, the ministry said yesterday, led by a decline in sales abroad.
“The orders disappointed and these numbers move in sync,” said Aline Schuiling, an economist at Fortis Bank Nederland in Amsterdam. “The German industrial sector is in a strong recovery phase. One month doesn’t change that. The underlying trend remains healthy.”
Manufacturing output fell 1.6 percent in October, driven by a 3.5 percent drop in production of investment goods, today’s report showed. Energy production declined 3.4 percent and construction output dropped 2.4 percent.
‘Less Dynamism’
“The overall trend for industrial production still points upward,” the ministry said in a statement. “The recovery of industrial production should continue in the fourth quarter, albeit with less dynamism.”
German stocks erased gains after the report and yields on German two-year bonds extended their decline to 1.25 percent at 12:05 p.m. in Frankfurt from 1.32 percent this morning. The euro was little changed at $1.4829. The currency’s 20 percent gain since mid-February may hurt exports by making them more expensive.
Daimler AG, the world’s second-largest maker of luxury cars, has said that it will shift production of its best-selling Mercedes-Benz C-Class model to Alabama to reduce its reliance on German factories and take advantage of the cheaper dollar.
Chancellor Angela Merkel’s government is spending about 85 billion euros ($126 billion) on measures to stimulate growth, including a 2,500-euro payment for people who junk an old car to buy a new one. That subsidy expired in September.
The Bundesbank nevertheless on Dec. 4 raised its growth forecasts, saying that exports, business investment and private consumption will grow in importance as fiscal stimulus measures expire. It expects gross domestic product to increase 1.6 percent next year after dropping 4.9 percent this year.
German economic growth accelerated to 0.7 percent in the third quarter from 0.4 percent in the second, when it pulled out of recession. Business confidence increased to a 15-month high in November, suggesting the economic recovery may gather pace next year.
To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net
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