German factory output slumps

Following an increase in July, industrial production in Germany reported a significant drop of 1.2 percent in the month of August, official data released by the Economy Ministry in Berlin showed Wednesday.

The decline was led by a 2.1 percent drop in production of investment goods such as machinery, the ministry said in a statement, adding that "unfavorable configuration" of vacation time contributed to the fall.

The August production figure fell short of analysts' expectations, who had predicted a slight increase by 0.2 percent in a consensus forecast by news agency Reuters.

Carsten Brzeski, economist with Dutch bank ING said German industry was currently "lacking momentum."

"The data will fuel speculation about the German economy increasingly suffering from the slowdown in growth in China," he told Reuters.

Commerzbank analyst Ralph Solveen also pointed out that the summer holidays had a negative impact especially on car production. "But the trend in the past months was generally flat so that we cannot expect a significant increase in German growth in the third quarter," he added.

Fewer orders

The negative trend in German factories is also reflected by a hefty fall in industrial order books in August, which slumped by an unexpected 1.8 percent after already contracting by 2.2 percent in the previous month of July.

The Economy Ministry attributed the second month of contraction to weaker growth in China and other major emerging markets.

The data showed that the August decline was led by a 3.7-percent decline in demand from nations outside the 19-member eurozone, with total foreign orders shrinking 1.2 percent.

Domestic German orders also dropped sharply in August, falling 2.6 percent. When big-ticket items were excluded, the fall in total orders was even bigger. The one bright spot in the ministry's report was a solid rise in eurozone orders which increased 2.5 percent.

uhe/sri (Reuters, AP, dpa)