Germany's industrial production decreased more-than-expected in June, adding to fears that the economy may have contracted in the second quarter, preliminary data showed Wednesday.
Overall industrial production fell a calendar-and-seasonally adjusted 0.9 percent from May, the Ministry of Economics and Technology said. The rate of decline was slightly faster than 0.8 percent forecast by economists.
In May, production had increased 1.7 percent month-on-month, which was revised upwards by 0.1 percentage point from preliminary estimates.
June's slump in activity was driven mainly by a 2 percent fall in construction output. Manufacturing output was down by 1 percent during the month.
Production of capital goods decreased by 1.6 percent sequentially, while consumer goods and intermediate goods output were lower by 0.9 percent and 0.3 percent respectively, data showed. Energy output, meanwhile, rose 1.2 percent.
On an annual basis, industrial production dropped a working-day adjusted 0.3 percent in June, as it did in the preceding month. In contrast, economists were looking for a 0.3 percent increase.
In the two months ended June, industrial production edged up 0.1 percent from the March-April period. In the second quarter, output dropped 0.2 percent from the first three months of 2012, the agency said.
"With the supposedly ultra-competitive German manufacturing sector in recession, the omens for the rest of the euro-zone economy are extremely worrying", Capital Economics Chief European Economist Jonathan Loynes said.
"Such a weak economic environment will make further fiscal progress in the indebted peripheral economies very difficult indeed," he added.
Germany's manufacturing activity is likely to remain subdued in the coming months, with government data released yesterday showing that new orders in the sector declined a bigger-than- expected 1.7 percent in June.
According to the latest Purchasing Managers' survey, private sector activity in Germany contracted in July due to a sharp decline in manufacturing production.
Moody's Investors Service has warned Germany that it may lose its coveted triple-A credit ratings due to intensified uncertainty regarding the outcome of the debt crisis.
However, Standard & Poor's early this month retained Germany's top notch 'AAA' credit ratings saying the economy remains resilient to withstand economic and financial shocks. S&P expects Germany's real growth to slow approximately to 1 percent in 2012 and 2013.
by RTT Staff Writer
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