German industrial output rises more than anticipated on cars

GERMAN industrial production rose in June – offering some good news for Europe’s largest economy after it unexpectedly shrank last quarter.

Output increased 1.4 per cent from May, surpassing the one per cent median estimate in a Bloomberg survey of analysts. Cars and electrical equipment drove the advance, data on Wednesday (Aug 7) showed.

The reading follows a bigger-than-expected gain in factory orders in June, though other recent data releases have disappointed: Gross domestic product, business sentiment and a gauge of private-sector output all saw surprise drops.

Separate figures on Wednesday showed exports shrank much more than analysts had expected in June, recording a 3.4 per cent decline from May.

“The spell of weak demand has not yet been fully overcome,” the Bundesbank said in its July report, warning that “industrial activity is likely to improve only slowly.” The German central bank nevertheless predicted slightly firmer economic activity in the third quarter.

With manufacturers underperforming so far this year, the onus has been on services to underpin growth. A boost from industry would result in a more balanced recovery for Germany – especially with inflation proving stubborn and high wage increases fading. BLOOMBERG