German production dropping below economists' estimates

By Gabi Thesing  |   2008-12-9  |     NEWSPAPER EDITION

INDUSTRIAL production in Germany, the world's biggest exporter, fell more than economists forecast in October after demand for plant and machinery faltered.

Output dropped a seasonally adjusted 2.1 percent from September, the Economy Ministry in Berlin said yesterday. Economists expected a decline of 1.9 percent, the median of 39 forecasts in a Bloomberg News survey showed. From a year earlier, production adjusted for working days fell 3.8 percent.

Factory orders dropped more than economists expected in October after posting a record decline the previous month and Germany's Bundesbank predicts the manufacturing sector will be "particularly hard hit" next year.

"The outlook for German industry is catastrophic," said Juergen Michels, an economist at Citigroup in London. He predicts the economy will contract 1.5 percent next year.

The ministry revised last month's figure to a 3.3-percent decline from an initially reported 3.6 percent, according to yesterday's statement.

This month's drop was led by a 3.1-percent slump in investment goods such as plant and machinery.

Germany exported goods for 969 billion euros (US$1.25 trillion) last year, 65 percent of which went to European Union countries.

The VDMA machine makers association said last week that orders for plant and machinery dropped 16 percent in October from a year earlier.

"Against the backdrop of slower orders for the past few months we expect industrial output to weaken in the coming months," it added.

The credit crunch and recessions in the United States and Europe have plunged the auto industry into what General Motors Corp has called the worst crisis since 1945. The sales slump has prompted German auto makers, including Opel, Mercedes-Benz and BMW, to cut production by more than 200,000 vehicles this year, putting pressure on suppliers.