Germany Industrial Output Declines In September

Germany's industrial production declined more than expected in September, defying hopes for a rebound, data from Destatis revealed Thursday.

Industrial production fell 0.6 percent month-on-month in September, reversing a 0.4 percent rise in August. Economists had forecast a moderate drop of 0.3 percent.

On a yearly basis, industrial output was down 4.3 percent, which was faster than the 3.9 percent decrease logged in August. Production was expected to decrease 4.4 percent.

Data came after the release of factory orders on Wednesday that showed a rebound in demand in September. Orders advanced 1.3 percent, reversing August's 0.4 percent fall.

Hopes for a quick rebound of German industry were short-lived, Carsten Brzeski, an ING economist said. The only upside from the data is construction activity.

With the September rebound, construction should have been a weak but positive growth driver in the third quarter, Brzeski noted. The recent development of incoming orders gives at least some hope, Ralph Solveen, a Commerzbank analyst said. Nevertheless, a rapid turnaround in production is not to be expected.

Solveen said a slight drop in production can also be expected for the fourth quarter. The economy ministry said the weakness in the industry is not yet overcome. However, the slight improvement in orders and business expectations brightened the outlook for the fourth quarter somewhat.

The German government's independent economic advisers slashed the growth forecast on Wednesday but said a severe recession is unlikely.

Advisers lowered growth outlook for 2019 to 0.5 percent from 0.8 percent and the projection for next year to 0.9 percent from 1.7 percent.

The government also forecast 0.5 percent expansion for 2019 and 1 percent growth for 2020.

Excluding energy and construction, industrial production fell 1.3 percent from the previous month. Energy output advanced 2 percent and construction expanded 1.8 percent in September.

Purchasing Mangers' survey from IHS Markit showed on Thursday that Germany's construction sector grew the most in six months in October. The Purchasing Managers' Index rose to 51.5 from 50.1 in September.