German industrial output slumps in June

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German industrial output fell 1.1 percent in June from May largely because of a slump in construction, provisional figures showed Friday as markets fretted about the chances of an economic downturn.

May showed a gain of 0.9 percent but this was revised lower from the economy ministry's initial estimate of 1.2 percent.

Industrial production in the biggest European economy grew by 2.0 percent for the second quarter as a whole, the ministry said, adding that several holidays and long weekends were a factor in June's decline.

Analysts polled by Dow Jones Newswires had expected output to remain stable in the month.

Looking at sectors as a whole, construction activity lost a hefty 4.5 percent and manufacturing was 0.9 percent lower while energy output gained 0.7 percent on the month.

The news will do little to soothe financial markets that have been unsettled by concerns that another global recession is in the offing as a result of debt crises in Europe and the United States.

"For a long while, the German economy seemed to be immune against all kind of threats," ING senior economist Carsten Brzeski commented.

But effects from the eurozone debt crisis are showing up in the wider economy and "strong German growth should not be taken for granted," he noted.

A breakdown of the ministry's numbers showed the largest decline was in durable consumer goods like home appliances, with output down 6.3 percent.

A small gain of 0.3 percent was notched up by intermediate goods, which are used to provide finished products or services.

On Thursday, economy ministry figures showed that orders for German industrial goods climbed 1.8 percent in June, defying a forecast fall of 1.2 percent owing to bulk orders from abroad, in particular from other eurozone countries.

That should provide "a cushion to industrial production until the end of the year," Berenberg Bank senior economist Christian Schulz said.

Chancellor Angela Merkel has forecast German economic growth this year on a comparable level with that of 2010, when activity expanded by 3.6 percent.

The Bundesbank central bank expects growth of 3.1 percent, while the International Monetary Fund sees 3.2 percent.

© 2011 AFP

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