German industrial output points to weak quarterly growth

[FRANKFURT] German industrial production rebounded in June, official data showed Monday, but analysts warned that the expansion won't redeem a sluggish second quarter for Europe's biggest economy.

Industrial output posted growth of 0.8 per cent in June compared with the previous month, preliminary data adjusted for price, calendar and seasonal effects from the federal statistics office Destatis showed.

It was a slightly weaker performance than expected ahead of Friday's quarterly GDP growth announcement, as analysts surveyed by Factset had predicted 0.9 per cent growth.

Growth in June meant a turnaround from May's unexpected 0.9 per cent shrinkage, which Destatis on Monday revised down from the preliminary figure of 1.3 per cent.

The latest release completes a picture of a 1.0 per cent decline in production over the second quarter, the economy ministry said in a statement.

June's increase "comes too late to make a disappointing quarter for German industry a good one," economist Carsten Brzeski at ING Diba bank wrote.

But the figures "take away some fears of a hard landing of the German economy in the second quarter," he went on.

"GDP will post only a small gain at best" based on the production figures and other key indicators, Ralph Solveen of Commerzbank predicted.

Looking to individual sectors, manufacturing saw production growth of 1.5 per cent while construction shrank by 0.5 per cent.

Analysts noted that manufacturing growth in June was unsurprising, as May saw a large number of public holidays cut into output - especially in the automotive sector.

Meanwhile, another weak showing for construction confirmed that slowing production over the second quarter was "largely traceable to delays due to bad weather in the construction sector," the economy ministry said in a statement.

Looking ahead, observers saw little prospect of a resurgent German economy over the second half of the year.

June figures showed little impact from Britain's vote to leave the European Union on 23 June.

But Brexit-related uncertainty "should leave some marks on German industrial activity over the coming months," ING's Brzeski said.

The economy ministry predicted that "given the restrained development of new industrial orders, a moderate upwards trend is to be expected in the coming months."

Rather, "we should expect a sideways movement in industrial production," said Mr Solveen at Commerzbank, "and therefore sluggish growth of the overall economy".

AFP