Financial News: German Industrial Output Falls Further, Construction Activ

German Industrial Output Falls Further, Construction Activity Downturn Deepens

(RTTNews) - Germany's industrial production declined for the fourth straight month in September and the downturn in construction deepened further, reinforcing fears of a recession at the end of the year.

Industrial output registered a monthly fall of 1.4 percent, faster than the revised 0.1 percent drop in August, data published by Destatis revealed on Tuesday. This was the fourth consecutive decline.

Economists were expecting output to drop 0.1 percent after August's initially estimated decrease of 0.2 percent.

Industrial production, excluding energy and construction, was down 1.7 percent from August.

The production of capital goods decreased 0.2 percent and that of intermediate goods fell 1.9 percent. In addition, consumer goods output slid 4.9 percent.

Production of vehicles plunged 5.0 percent from the previous month. Decreases were also seen in the manufacture of electrical equipment and in the pharmaceutical industry. By contrast, the manufacture of machinery and equipment sector grew 4.1 percent.

Data showed that energy production was down 1.7 percent in September, while construction output remained unchanged.

On a yearly basis, industrial production registered a 3.7 percent fall in September.

The less volatile quarter-on-quarter comparison showed that production was 2.1 percent lower in the third quarter than in the second quarter.

Elsewhere, purchasing managers' survey results from S&P Global showed that Germany's construction sector contracted the most in three-and-a-half years in October with steep declines in demand and employment.

The HCOB construction Purchasing Managers' Index dropped to 38.3 in October from 39.3 in September. A score below 50.0 indicates contraction.

The downturn was again led by the housing sector as the decline in residential project works was one of the biggest in the series history. Civil engineering activity decreased at a quicker pace and commercial activity shrank at a pace similar to the previous survey period.

The weakness of the industrial sector is a key reason why GDP is estimated to contract again in the fourth quarter after falling 0.1 percent in the third quarter, Capital Economics' economist Andrew Kenningham said. It is unlikely to recover in the first half of next year.

ING economist Carsten Brzeski said disappointing data not only suggests that third-quarter GDP growth could be revised downwards, but also that the largest euro area economy is likely to end the year in a technical recession.

The International Monetary Fund projected Germany to shrink 0.5 percent this year owing to the weakness in interest-rate-sensitive sectors and slower trading-partner demand.

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