German industrial output slips

6th August 2010, Comments 0 comments

German industrial output eased 0.6 percent in June from 2.9 percent in May, seasonally-corrected data showed on Friday, a sign that strong growth in Europe's top economy could slow later this year.

The economy ministry revised the May figure from 2.6 percent.

Using a two-month sliding average designed to iron out exceptional events, output was up an impressive 3.3 percent in May and June compared to March and April.

Production jumped more than five percent in the second quarter of the year compared to the first three months, which Barclays Capital said was the best result in records dating back to 1960.

Coupled with a jump of 3.2 percent in industrial orders in June, the ministry said the sector "should remain a major factor in continued economic improvement in Germany" this year.

Economists also welcomed the figures, which could mean the German economy grew overall by between 1.2 and 2.0 percent in the second quarter but warned "the party won't go on forever," in the words of UniCredit's Alexander Koch.

Automakers could be hit by weaker European sales and while output could rise further in the coming months, "industry will hardly sustain its current pace on a lasting basis," Commerzbank economist Ralph Solveen noted.

On Thursday, the European Central Bank said the 16-nation eurozone economy should "grow at a moderate and still uneven pace, in an environment of uncertainty," this year.

Germany officially expects its economy to expand 1.4 percent this year but many economists and even the finance and economy ministers have mooted a level closer to 2.0 percent.

But after pulling out of a historic recession with a strong start in the first half of 2010, "towards the end of the year we will have to live with a substantially lower growth dynamic again," Koch said.

© 2010 AFP

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