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German Industrial Output Surprise Rebound Suggest Economy To Avoid Recession

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A surprise rebound in German industrial production in August suggest that the biggest euro area economy may avoid recession, but the sector remains in downturn due to weak demand.

Production grew 0.3 percent month-on-month in August, figures from the Federal Statistical Office showed on Tuesday, defying expectations for a 0.2 percent fall.

The increase was driven by a 0.7 percent growth in industrial production, while energy production shrunk 1.7 percent and construction output decreased 1.5 percent.

July's decline in production was revised to 0.4 percent from 0.6 percent.

Among industrial groups, production of intermediate goods grew 1 percent monthly and that of capital goods rose 1.1 percent. Consumer goods output decreased 1 percent.

However, industrial production decreased 4 percent year-on-year after a 3.9 percent fall in July.

In the July to August period, automobile production shrunk 4.7 percent from the May to June period.

The industrial downturn continues despite the latest rebound, thanks to weak demand, the Economy Ministry said.

Factory orders declined a more-than-expected 0.6 percent monthly in August on weak domestic demand, official data showed on Monday.

Elsewhere on Monday, survey results from the think tank Sentix revealed that German investor confidence deteriorated sharply in October to the weakest since July 2009.

The German economy shrunk 0.1 percent in the second quarter and economy widely expect another contraction in the third quarter that will push the economy into recession.

Early this month, Germany's leading economic institutes slashed the economic growth forecast for this year and next, mainly citing the weakening global demand for capital goods exports.

Commerzbank economist Marco Wagner expects the general downward trend in industry to continue.

"The recent significant drop in purchasing managers' indexes and ifo expectations do not give rise to any hope of an imminent turnaround for the better, especially as the global economy continues to falter," the economist said.

The Germany's manufacturing sector contracted the most since the global financial crisis in 2009, the purchasing managers' survey showed. The expectations index of the ifo survey fell to its lowest level since June 2009 in September.

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