German industrial output disappoints, but analysts keep faith

Wednesday, August 08, 2018

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FRANKFURT AM MAIN, Germany (AFP) — German industrial production disappointed in June while exports were flat, official data showed yesterday, but analysts said it was too early to declare the party over for Europe's powerhouse economy despite trade tensions.

Industrial output fell 0.9 per cent month-on-month, federal statistics authority Destatis said, following a 2.4-per cent rise in May.

Analysts surveyed by Factset had been expecting a smaller drop of 0.6 per cent.

Destatis also released figures showing that Germany's oft-criticised trade surplus narrowed slightly in June as exports stayed flat, while imports jumped 1.2 per cent to hit their highest monthly value since records began in 1950.

Adjusted for seasonal swings, the trade surplus stood at 19.3 billion euros (US$22.3 billion) in June.

“June's industrial production and trade figures suggest that the previously booming German economy is already feeling the effects of trade tensions,” Capital Economics said in a client note.

The readings come a day after German industrial orders in June fell sharply, adding to speculation that the German economy is losing momentum.

But analysts cautioned against reading too much into volatile monthly data, pointing to brisk domestic consumption and a strong labour market, while demand for 'Made in Germany' goods remains at a high level.

And although the United States is locked in a tit-for-tat trade war with China, transatlantic trade tensions have eased after President Donald Trump and European Commission chief Jean-Claude Juncker agreed to a temporary truce last month.

The deal came as a relief to German automakers in particular, who had been bracing for Trump to follow through on his threat of slapping hefty tariffs on car imports.

“With the domestic economy in good shape and given the recent ceasefire in the tariff war, we expect only a modest slowdown in German growth,” Capital Economics said.

Germany will announce its second-quarter growth figure next week, and analyst Carsten Brzeski of ING Diba bank said it could “easily outperform” the Eurozone's 0.3 economic growth rate between April and June.

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