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German Industry's Bad News Keeps Coming as Output Declines

(Bloomberg) -- German industrial production unexpectedly fell in April, continuing a run of poor economic news from Europe’s largest economy.

The 1 percent drop in output, along with a shock decline in factory orders reported earlier this week, indicates a moderate pace of expansion at the start of the second quarter. A separate report showed that exports fell 0.3 percent in April, while in France, industrial production also declined.

The euro fell after the German data and was down 0.2 percent at $1.1772 as of 9:44 a.m. Frankfurt time.

German Industry's Bad News Keeps Coming as Output Declines

A series of downbeat numbers from across the euro area suggests that a slower pace of expansion is the new normal. The continued weakness even in the region’s largest economy, underscored by four months of sliding manufacturing orders, will cast a shadow over the European Central Bank’s crucial policy meeting next week, when officials plan to discuss the future of their stimulus program.

Country

April Production

April Forecast

March

Germany-10.31.7
France-0.50.3-0.4
Spain-1.8-0.21
Netherlands0.6                        ---0.1

ECB policy makers have acknowledged that growth has moderated, blaming temporary factors, uncertainty around trade protectionism, and an unsustainably strong pace of expansion last year.

While monthly numbers can be erratic, the drop in German production wasn’t an isolated incident. Factory orders plunged 2.5 percent in April and a measure of private-sector activity in the eurozone dropped in May. The Economy Ministry said that the timing of public holidays affected output in April, though it acknowledged that the growth outlook for industry has cooled.

Providing some hope for the German economy, Commerzbank said Friday that its “Early Bird” indicator rose in May, in part because of the euro’s recent weakness. That’s good for an export-heavy economy such as Germany’s. According to Commerzbank, the indicators suggest that the current soft patch should last a “bit longer but is not the end of the upswing.”

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