Buoyed by a marked pick up in capital goods, Germany's industrial production increased at a faster-than-expected pace in August, brightening the outlook for the economy that started recovering in the June quarter.
Preliminary estimates released by the Economy Ministry on Wednesday showed that industrial production, adjusted for seasonal variations, advanced 1.4 percent sequentially, after falling a revised 1.1 percent in July.
Economists had forecast a weaker growth of 1 percent, following the previous month's originally recorded 1.7 percent contraction.
August's rebound was driven mainly by a 4.4 percent growth in investment goods production, and a 0.4 percent gain in consumer goods. Output of intermediate goods was higher by 0.1 percent than in July.
Annually, industrial production moved up 0.3 percent in August, contrary to economists' forecast for a 1.4 percent decline. The outcome followed a 1.7 percent decrease in July. During the two months ended August, industrial production moved up 0.8 percent from the preceding two-month period, data showed.
Meanwhile, damping the prospect of a sustained improvement in production levels in the coming weeks, data published by the government yesterday showed that new orders in the manufacturing sector declined unexpectedly in August due to a fall in euro area demand.
Ben May of Capital Economics said that the latest industrial data suggest that another quarter of solid German GDP growth appears likely in Q3. "But looking ahead, we expect the industrial sector to record steady rather than spectacular growth," the economist noted.
Earlier this month, data from the manufacturing purchasing managers' survey compiled by Markit Economics showed that the German factory sector expanded for the third straight month in September, though at a slightly slower rate than in the previous month, as both output and new order volumes increased.
In September, the Bundesbank said Germany's economic growth will continue in months ahead, citing the noticeable improvement in expectations for production and exports.
The German economy expanded 0.7 percent sequentially in the June quarter, following a weak start into the year and a modest contraction in the final three months of 2012. The positive contribution to the GDP in the second quarter mainly came from strong domestic demand.
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