German Industrial Production Drops More Than Forecast; Trade Surplus Falls

(RTTNews) - Raising fears of a recession, Germany's industrial production declined more than expected in July on weaker automotive output and the trade surplus contracted in July as the growth in imports exceeded the rise in exports.

Industrial production decreased 2.4 percent month-on-month in July, in contrast to the increase of 1.7 percent in June, Destatis reported Friday. Output was forecast to fall 0.4 percent.

In three months to July, industrial production was 2.7 percent lower than in the same period last year.

Data showed a significant 8.1 percent fall in the automotive industry. The manufacture of electrical equipment and the manufacture of fabricated metal products also fell 7.0 percent and 3.8 percent, respectively.

Excluding energy and construction, industrial output was down 3.2 percent on month and declined 6.1 percent annually.

Output of capital goods slid 4.2 percent and that of intermediate goods dropped 2.8 percent. Consumer goods output was down 1.2 percent.

There was a decrease of 1.9 percent in energy production, while production in construction gained 0.3 percent.

Year-on-year, the decline in industrial output deepened to 5.3 percent from 3.7 percent in the previous month.

ING economist Carsten Brzeski said a fall in German industrial production in July not only brings a weak start to the third quarter but is another illustration of how difficult it will be to bring the economy back to strong growth.

Capital Economics' economist Franziska Palmas said the big drop in German industrial production in July adds to the sense that the sector is facing a deep crisis. As the economy contracted in the second quarter, it may fall back into a technical recession in the third quarter, the economist noted.

Another data from Destatis showed that exports rebounded 1.7 percent on a monthly basis, reversing a 3.4 percent fall in June. This was also faster than economists' forecast of 1.2 percent gain.

However, imports grew at a much faster pace of 5.4 percent after a 0.2 percent rise in June. Economists had forecast a 0.3 percent increase.

As a result, the trade surplus declined to EUR 16.8 billion in July from EUR 20.4 billion in the previous month. The expected surplus was EUR 21.0 billion.

On a yearly basis, exports advanced 5.4 percent, reversing June's 8.2 percent decrease. Likewise, imports moved up 4.8 percent, following a 9.2 percent drop in the previous month.