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German Industrial Output Declines Unexpectedly

germanyindustrialproduction-oct08-lt.jpg

Germany's industrial production declined unexpectedly in August on a notable weakness in construction, suggesting that the economy lost some momentum in the third quarter.

Data from Destatis showed that industrial output slid 0.3 percent from July, confounding expectations for an increase of 0.5 percent. This was the third consecutive decline in output. Production had decreased 1.3 percent in July.

On a yearly basis, industrial production logged a fall of 0.1 percent in August, in contrast to the expected growth of 0.1 percent and a 1.5 percent increase seen in July.

Excluding energy and construction, industrial production dropped 0.1 percent month-on-month in August.

Among components, energy production advanced 1.3 percent in August, while construction output contracted 1.8 percent.

Output of consumer goods grew 1.4 percent and that of intermediate goods showed an increase of 0.1 percent. On the other hand, capital goods output decreased 0.7 percent.

"It would still be too premature to dent our optimism," Carsten Brzeski, an ING DiBa economist, said.

"Too often has there been a surge in industrial (and economic) activity in Germany after the summer vacation."

The fall in industrial output was much weaker than expected and suggests that the economy is very unlikely to match second quarter's 0.5 percent expansion in the third quarter, Jennifer McKeown, an economist at Capital Economics, said.

But Germany will continue to be one of Eurozone's strongest performers, the economist noted.

Elsewhere, a survey from the think tank Sentix showed that despite the negative discussions about the automotive industry and the question marks over the continued existence of the current government coalition, the German economic data remain stable.

The investor confidence index for Germany rose to 20.0 in October from 18.1 in September.

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