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German Industrial Production Unexpectedly Falls

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Germany's industrial production in October unexpectedly dropped for the first time in three months, suggesting that manufacturing is yet to recover from a slowdown despite some improvement in demand.

Industrial production dropped 0.5 percent from September, when they grew 0.1 percent, revised from 0.2 percent, preliminary figures from the Federal Statistical Office showed on Friday. Economists had forecast a 0.3 percent increase.

The latest fall was the first since a 1 percent slump in July.

Within industry, production of consumer goods dropped 3.2 percent, while that of capital goods grew 0.3 percent. Intermediate goods output rose 0.2 percent.

Excluding construction and energy, industrial production decreased 0.4 percent from the previous month.

Energy output dropped 3.2 percent and construction fell 0.3 percent.

On a year-on-year basis, industrial production increased 1.6 percent in October after a 0.7 percent gain in September. Economists had expected a 2.1 percent rise.

Automobile production shrunk 0.5 percent after a strong recovery in September, the Economy Ministry noted. The decline suggests that the problems due to the transitions to the WLTP emissions testing regime have only started dissipating.

Strong new orders for automobiles and a larger variety of passenger cars under the new standard indicate that the rate of growth of the German industry is set to pick up again in during the rest of the fourth quarter, the ministry added.

Figures released on Thursday revealed that manufacturing orders unexpectedly increased for a third straight month in October, led by strong foreign demand, especially from euro area countries.

"The latest developments still support moderate optimism," ING Bank economist Carsten Brzeski said.

"Taking the trend of the last three months, German industry has at least not lost more momentum but instead is treading water."

Meanwhile, the latest purchasing managers' survey showed that manufacturing growth fell to a 31-month low in November as new orders fell for a second straight month and at the fastest pace in four years.

Separate data from the statistical office showed on Friday that labor costs rose 1 percent sequentially in the third quarter, which was the biggest gain since the final three months of 2016.

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