2019.08.0708:27:00UTC+00German Industrial Output Decline Exceeds Expectations

Germany's industrial production declined more-than-expected in June, fueling recession fears as trade disputes weigh on exports, official data showed Wednesday.

Industrial production fell 1.5 percent on a monthly basis in June, reversing a revised 0.1 percent rise in May, Destatis reported. Output was forecast to drop moderately by 0.5 percent.

Excluding energy and construction, production fell 1.8 percent. Energy production was down by 1.6 percent, while construction output increased 0.3 percent.

Year-on-year, industrial production declined at a faster pace of 5.2 percent after easing 4.4 percent a month ago. Economists had forecast a 3.1 percent decrease.

Data released on Tuesday showed that factory orders rebounded in June, rising 2.5 percent on a monthly basis, offsetting a 2 percent drop in May.

In the second quarter, industrial production fell 1.8 percent sequentially, largely driven by metal, mechanical engineering and auto production.

Looking ahead, despite yesterday's encouraging industrial orders data, the combination of high inventories and few orders at hand does not bode well for industrial production in the months ahead, Carsten Brzeski, an ING economist, said.

Recent tentative signs that the domestic economy's resilience is crumbling are concerning, the economist added.

Ralph Solveen, deputy head of economic research at Commerzbank, said manufacturing will remain the weak spot of the German economy. Production there is likely to fall again in the third quarter.