Business

Thursday July 9, 2009

German May industry output rise strongest in 16 years


BERLIN: German industrial production rose at the fastest pace in nearly 16 years in May, official data showed yesterday, bolstering hopes Europe’s biggest economy may be starting to recover from a deep recession.

The rise was largely due to a jump in car sales, prompted by a government scheme, but analysts said even with that stripped out the figures were strong.

Industrial output rose by 3.7% on the month in May. A Reuters poll had pointed to a rise of 0.5% after a fall in April. May’s rise was the strongest gain since August 1993, when output climbed 4.1%, Bundesbank data showed.

The stronger-than-expected data helped push the euro to a session high against the dollar, turning slightly positive on the day.

“A recovery phase is on the horizon but we shouldn’t be too euphoric,” said Sal Oppenheim economist Norbert Braems. “In the second quarter, the overall economy will likely still shrink a bit. We could see GDP (gross domestic product) in positive territory by year’s end.”

Germany, the world’s biggest exporter of goods since 2003, is expected to suffer an economic contraction of around 6% this year, dragged down by a slump in exports.

Yet measures of investor and corporate sentiment have rallied in recent months, raising hopes the economy could start to stage a timid recovery.

Manufacturing orders data, released on Tuesday, had boosted hopes for a recovery in output. Orders surged at their fastest pace in nearly two years in May due to stronger demand both at home and abroad.

“Given firmer orders, the prospects for a positive development in industrial production have improved,” the Economy Ministry said in a statement yesterday after it released the output data.

April output was revised down to show a drop of 2.6% on the month from a previously reported fall of 1.9%. Manufacturing output drove the seasonally-adjusted rise, climbing 5.1% and offsetting a decline of 3.2% in construction output and a fall of 3.8% in energy production.

The Economy Ministry said an increase in production of cars and car parts was driving the rise in manufacturing output.

Car sales have risen sharply in Germany as motorists cash in on government incentives to junk old cars and buy new ones. New car registrations swelled 40% in June.

“Apart from the car scrapping premium, foreign demand for German cars was a key driver as had already been reflected by the new orders data,” said Andreas Rees of UniCredit.

“Second, even without the auto sector, industrial activity would have managed a solid rise of 0.7% . ‘Backbone industries’ like the capital goods and the chemical sector reported better data as well.” — Reuters

Some German companies have expressed confidence in a long-term recovery in manufacturing. German chemicals trade group VCI said yesterday it expected the worst full-year drop in production output in more than 30 years in 2009 but the start of a recovery was imminent in the second half.

“The last two days were good news for the future stabilisation of the German economy,” ING Financial Markets’ Carsten Brzeski said of the orders and output data. “For a sustainable recovery, however, much more of the same will be needed.” — Reuters


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