2018.09.0708:55:00UTC+00German Industrial Output Falls Unexpectedly; Exports Drop Most In 5 Months

Germany's industrial production declined unexpectedly and exports logged its biggest fall in five months in July, signaling a weak start to the third quarter.

Industrial production fell 1.1 percent month-on-month in July, bigger than the 0.7 percent fall in June, data from Destatis revealed Friday. Economists had forecast a 0.2 percent rise for July.

Production in industry excluding energy and construction was down by 1.9 percent in July.

On a yearly basis, industrial production grew 1.1 percent, but slower than the 2.7 percent increase seen in June. Economists had forecast a 2.6 percent rise for July.

The economy ministry said the current weakness in manufacturing is related to temporary bottlenecks in car sales. Nonetheless, the upturn in the industry is likely to continue.

Another data showed that exports fell unexpectedly by 0.9 percent on month in July, reversing June's 0.1 percent rise. This was the first fall in three months and the biggest since February. Shipments were forecast to climb 0.3 percent.

Meanwhile, monthly growth in imports accelerated to 2.8 percent from 1.3 percent in June. Economists had forecast a marginal 0.1 percent rise.

As a result, the trade surplus fell to a seasonally adjusted EUR 15.8 billion from EUR 19.3 billion in the previous month.

On a yearly basis, exports advanced 7.6 percent and imports climbed 12 percent in July. Consequently, the trade surplus decreased to unadjusted EUR 16.5 billion in July from EUR 18.8 billion in the same period of last year.

Data showed that the current account surplus fell to EUR 15.3 billion from EUR 18.7 billion last year.

Despite the weakness in industrial production and foreign trade data, Jack Allen, an economist at Capital Economics, said the German economy looks set to continue growing at a decent pace, helping to support the economic recovery elsewhere in the euro-zone.

The latest weak data won't be enough to cause the European Central Bank to extend its asset purchases into next year, but they support the Bank's view that interest rate hikes are a long way off, the economist added.

In another communiqu?, Destatis said labor cost increased at a slower pace of 0.2 percent sequentially in the second quarter after rising 0.9 percent in the first quarter. On year, labor cost growth eased to 2 percent from 2.4 percent.