German Industrial Output and Orders April 2008

Industrial production in Germany, Europe's largest economy, declined for the second consecutive month in April, the second report in as many days to suggest Europe's largest economy is cooling. Output, adjusted for seasonal swings and inflation, fell 0.8 percent from March when it fell 0.8% from February. Year on year output was up by 4.8% but the rate is still considerably down from the strongest points in the current expansion.



Production of intermediate goods dropped 2.2 percent in the month, while consumer goods and construction output declined 2.5 percent and 2.9 percent respectively, the ministry said.

Germany's economy is losing momentum as near-record oil prices push up inflation and crimp company and household spending power, just as a surging euro weighs on exports, and slowdowns in Italy and Spain also act as a drag. The outlook is also far from promising since European Central Bank President Jean-Claude Trichet said yesterday policy makers rather then loosening interest rates may even raise borrowing costs next month to curb record inflation, further damping the expansion.





Annual price gains in the euro area last month accelerated to 3.6 percent. In its quarterly forecasts, the ECB said yesterday that inflation, which it aims to keep just below 2 percent, will average about 3.4 percent this year and 2.4 percent next.

Faster inflation is starting to hurt growth. European retail sales declined 2.9 percent in April, more than three times as much as economists forecast, a report showed earlier this week. German car sales fell 6 percent last month, the VDA auto-industry trade group said June 3.


Adding to companies' woes, the euro has gained 15 percent against the dollar and 17 percent against sterling over the past year, while the price of oil has more than doubled in the same period, topping $135 to set a record on May 22.

Manufacturing orders in Germany also fell for the fifth month in succession in April , figures showed yesterday, the longest streak since 1992, as demand from the euro area slumped. Orders, adjusted for seasonal swings and inflation, fell 1.8 percent from March, according to the Economy Ministry in Berlin. This is the first time since July 1992 that manufacturing orders dropped for five consecutive months.

Foreign manufacturing orders fell 3.8 percent in the month, while domestic orders gained 0.3 percent, the ministry said yesterday. Demand from the euro-region countries slid 5.6 percent and orders from outside the currency area dropped 2.3 percent.


















Evidently not all German companies are suffering to the same measure.German plant and machinery orders rose the most in more than a year in April, driven by sales abroad, according to the VDMA machine makers association Orders increased 35 percent from a year earlier, that's the most since March 2007. Export orders increased 44 percent and domestic orders gained 19 percent from a year ago.

``Foreign orders were additionally fueled by large plant orders,'' VDMA Chief Economist Ralph Wiechers said in the statement. ``The order increase of 11 percent since the beginning of the year is a good characterization of the order situation in the machinery sector.''

In the three months through April, orders increased 12 percent from a year earlier, today's report showed. Domestic orders increased 7 percent and foreign orders rose 14percent. VDMA surveys all large German machinery makers and most small ones. Its statistics capture orders at companies that employ 15 percent of all factory workers and account for 13 percent of total manufacturing sales.