German industrial output posts surprise jump: ministry

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German industrial output rose far more than expected in August, by 1.7 percent, official data showed on Thursday after a surprise jump in orders boosted prospects for the entire eurozone economy.

The monthly increase in Europe's biggest economy was far better than an analyst forecast of 0.1 percent compiled by Dow Jones Newswires, the same rise as in July, the economy ministry data showed.

Output in August "was back in phase with a pick-up in the first half, after a calmer trend in the previous two months," a ministry statement said.

The German economy posted record growth in the second quarter of 2010, and while the pace has eased since then the country is still on track for a strong full-year result.

On Wednesday, the ministry said German factories raked in foreign orders at a brisk pace in August as well, with demand for German goods jumping by 3.4 percent in another signal that the economy was still on track.

With most of the growth in orders coming from eurozone partners, economists hailed the prospects for continued economic growth across the 16-nation bloc.

A breakdown of the output data showed the gain was largely the result of a rise in the production of industrial and capital goods used to produce other items, while activity contracted in the construction sector.

A two-month sliding average revealed a slower pace following the breakneck second quarter, with the figure for July and August gaining a modest 0.7 percent from May-June.

But ING senior economist Carsten Brzeski said: "Today's numbers brought important evidence that a substantial part of the second quarter momentum has been carried over into the second half of the year."

The International Monetary Fund has raised its eurozone forecast and now expects the economy to expand by 1.7 percent this year and by 1.5 percent in 2011, up from previous forecasts for 1.0 percent and 1.3 percent.

Germany's official 2010 forecast of 1.4 percent growth is set to be raised to near 3.0 percent in October.

"Another strong quarter with above-potential-growth is within reach and the German economy is heading towards its best growth year since reunification" 20 years ago, Brzeski said.

© 2010 AFP

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