German industrial output falls unexpectedly as China slows down

Hamburg

GERMAN industrial production unexpectedly fell in November, led by investment goods, in a sign that a slowdown in emerging markets such as China and Brazil may weigh on economic growth.

Output, adjusted for seasonal swings and inflation, slid 0.3 per cent from October, when it gained a revised 0.5 per cent, data from the Economy Ministry in Berlin showed on Friday. The reading, which tends to be volatile, compares with a median estimate for a 0.5 per cent gain in a Bloomberg survey of economists.

French industrial production slid 0.9 per cent, according to a separate release.

Germany's BGA trade group warned this week that a "hard landing" in China will push Europe's largest economy into a recession and said that the weak euro exaggerates the country's economic strength. The Bundesbank has expressed confidence in the recovery, pointing to an expected pick-up in global trade and robust private consumption benefiting from record low unemployment and rising wages.

"Economic momentum in Germany continues to be fed by private and public consumption, and additionally by a pick-up in construction," said Christian Lips, an economist at NordLB in Hanover. "China's economy moved into the focus again this week", but "for Germany, we are convinced that the economic recovery will continue", he said.

China has roiled financial markets across the globe after equity prices slumped and the yuan depreciated, raising concern that a slowdown in the region's largest economy is deepening. The International Monetary Fund predicts that growth will slow to 6.3 per cent this year from 6.8 per cent in 2015.

German exporters are responding by turning their focus to recovering economies such as the US. Shipments to the world's largest economy jumped more than 20 per cent in the 10 months till October from the previous year, while sales to China slipped 4.2 per cent.

Total foreign sales rose 0.4 per cent in November, the Federal Statistics Office said on Friday. Imports were up 1.6 per cent from the previous month.

German manufacturing output slid 0.8 per cent, driven by a 3.3 per cent slump in the production of investment goods. Energy production jumped 2.5 per cent and construction climbed 1.6 per cent. Bloomberg