The German economy remains on a path of strong growth despite a surprising decline in factory output in June, economists said following Monday's release of data on industrial production for Europe's biggest economy.
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In adjusted terms, output declined by 1.1% in June from the previous month, the country's Economics Ministry reported, marking the index's first monthly decline since last December. Economists polled last week by The Wall Street Journal had expected a slight gain of 0.1% in the index. The monthly decline was broad-based, with manufacturing output down 1.4% and construction output also down 1.0%. On the flip side, energy output grew by 1.4% compared with May.
The ministry reported, however, that output increased by 1.8% in the three months to end-June from the previous quarter. Indicators for new orders and business confidence pointed to a continued upward trend in industry, it said. Late last month, Germany's closely watched Ifo index of business sentiment hit a record high.
"This morning's decline isn't the end of the world, on the contrary. After a total of five consecutive monthly increases, it was sooner or later time for a technical breather," said UniCredit economist Andreas Rees in a note. He expects the German economy to have grown by 0.7% in the second quarter of the year. Data on economic output are due out next week.
Other economists agreed. "As unexpected as today's drop in industrial production has been, the German economy is still on track to post another strong quarter," said ING economist Carsten Brzeski in a research note. "Given the sound fundamentals, a month of weaker industrial data should only be like a rain shower on hot and humid summer day: a welcome refresher."
The ministry said Friday that total orders for the manufacturing sector increased by 1% in June compared with May, adjusted for seasonal swings and calendar effects. Economists polled by The Wall Street Journal had forecast a 0.5% rise. Analysts are also watching closely trade data, which Germany's statistics office is due to release Tuesday.
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(END) Dow Jones Newswires
August 07, 2017 04:29 ET (08:29 GMT)