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German data signal rebound intact but slowing
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BERLIN: A surprise fall in exports and near-zero growth in industry output in July suggested on Wednesday that the German industrial juggernaut may slow somewhat after building up record momentum earlier this year.
Data from the Federal Statistics Office showed exports, the main driver in Germany's rebound, fell by 1.5 per cent from June, while imports shrank by 2.2 per cent, adjusted for seasonal swings.
Industrial output also missed forecasts, inching up by 0.1 per cent in July compared to projections for a 1.0 per cent increase.
"The numbers show that the catch up is over and it is so earlier than expected," said Ulrich Kater of Dekabank.
"The pace of recovery is slowing down ... Still, we expect a GDP increase of 0.6 per cent for the third quarter. For the full year we estimate 3.4 per cent," he said.
Germany has its exports -- buoyed by an 11-per cent drop in the euro since the start of the year -- to thank for recovering quickly from its deepest post-war recession last year.
Europe's largest economy grew at 2.2 per cent in the second quarter, its fastest rate since reunification, setting it up for growth of at least 3 per cent this year, economists say.
However, they also expect the pickup to slow in the second half of 2010, not least because of the gloomy outlook for some of Germany's main trading partners. Adding to this, recent indicators have begun to point towards a slight slowdown.
Manufacturing orders fell 2.2 per cent in July, their steepest decline in more than a year, pressured by weaker demand from abroad and a below-average volume of big orders.
NO FIREWORKS
"A firework display of positive economic data can no longer be expected in the coming months," said Thorsten Polleit at Barclays Capital.
"In some countries like the United States and China growth has already slowed. These could be precursors to a declining upswing here."
On the upside, the pick-up is broadening and there are signs that German consumers, helped by low unemployment, may finally be coming out of their shells. The services sector expanded at its fastest rate in three years in August.
Of the 30 companies in the blue chip DAX index, 23 beat market expectations with their earnings in the quarter to end-June and 12 hiked their outlooks, signalling businesses are still profiting from the export-led rebound.
And Germany, where the government is embarking on eye-watering cuts in budget spending, still remains in much better shape than some of its more heavily indebted peers.
In Spain, industrial output rose for the fifth consecutive month in July but by much less than expected as stimulus programmes ran out, backing forecasts that the already weak economy is set to slow in the second half.
Greece's economy shrank at an annual pace of 3.7 per cent in the second quarter, the statistics service said on Wednesday, revising a previous flash estimate lower.
Irish bond spreads stayed at euro lifetime peaks and shares in its top two banks dropped sharply amid continuing uncertainty over the final bill for bailing out stricken Anglo Irish Bank, and the burden it will place on Irish public debt levels.
But the premium investors demand to hold Portuguese bonds rather than benchmark German Bunds fell from session highs on Wednesday after Lisbon successfully raised 1.04 billion euros in the bond market.
"Production should continue to rise at a reasonably healthy rate by historical standards, suggesting that the risks of Germany suffering from a "double-dip" remain much smaller than elsewhere," said Ben May at Capital Economics.
Germany, which buys and sells more than half its goods within the European Union, was the world's biggest goods exporter from 2003 to 2008, before being overtaken by China.-Reuters
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