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Friday, September 12, 2008

German Industrial Output Falls In July

German industrial production fell quite sharply in July, for the fourth time in five months, led by a drop in demand for investment goods such as machinery. Industrial output was a seasonally adjusted 1.8 percent from June, when it rose 0.1 percent, according to data from the German Economy Ministry earlier in the week. From a year earlier, production adjusted for working days fell 0.6 percent.

The German economy, which is Europe's largest, is showing few signs of recovery after contracting in the second quarter. Factory orders fell in July, manufacturing shrank last month and business confidence declined to a three-year low. The seasonally adjusted volume index (see chart below) hit a peak in February, and has been declining virtually non-stop since.

If we look at construction (see chart below) we see a similar picture with output peaking in February, although in this case, apart from the short spike at the turn of the year, the decline is longer term, and German construction activity really hasn't recovered the momentum it obtained in the winter of 2006/07.

Output of investment goods declined 3.7 percent month on month in July, while construction production fell 2 percent. The output of consumer goods dropped 1.7 percent, with production of durable goods falling 6.5 percent. Also German factory orders fell in July, extending their longest ever streak of decline. The VDMA manufacturers association said last week that plant and machine orders dropped for a third straight month in July, led by sliding demand.

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