2010.07.0808:35:00UTC+00German Industrial Production Rises More Than Expected

German industrial output grew more than expected in May, as production of intermediate and consumer goods increased compared to April.

The seasonally adjusted industrial production increased 2.6% month-on-month in May, following a revised growth of 1.2% in April, the Federal Ministry of Economics and Technology said Thursday. Economists had forecast just a 0.9% rise. On an annual basis, industrial production logged a 12.4% growth in May. That was slightly slower than April's revised 13.9% increase, but exceeded the expected increase of 9.3%.

"May's sharp rise in German industrial production adds to evidence that the negative effects from the euro-zone fiscal crisis are being more than offset by the global economic upturn and weaker euro," said Ben May, an economist at Capital Economics. However, the economist added that the German upturn may do little to improve prospects of the vulnerable economies in the periphery.

Detailed data showed that production of intermediate goods rose 3.2% on a monthly basis, better than April's 2.8% increase and that of capital goods climbed at a faster pace of 4.6% compared with the 0.2% gain seen in the previous month. Manufacture of consumer goods rebounded with a 1.7% growth.

ING Bank economist Carsten Brzeski said it is obvious that the industry remains the backbone of the German economy and today's numbers underlines that an excellent second quarter has materialized. Moreover, filling orders and improved business climate suggest that the sector will continue to support the wider economy in the months ahead.

The recent improvement in business and consumer sentiment, pick-up in retail sales and exports suggest that the prospects for the German economy is brightening further. Bundesbank forecasts the economy to expand 1.9% this year and at a slower pace of 1.4% in 2011.

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