BERLIN (Reuters) - German industrial output rose less than expected in October, data showed on Monday, offering only feeble support for hopes that Europe’s largest economy is returning to health after a weak third quarter.
Production rose by 0.2 percent thanks to a pickup in construction activity, though energy output dropped, data from the Economy Ministry showed. The headline figure missed the consensus forecast for a 0.3 percent gain.
“German industry had a weak start to the fourth quarter but given the better order levels, we expect a strong development in the coming months,” said Ulrike Kastens, economist at Sal Oppenheim, adding that lower oil prices and the weakness of the euro should provide support.
Figures last week showed industry orders rising far more than forecast in October but other data on the sector has been more downbeat – a recent purchasing managers survey showed manufacturing activity shrinking in November at the fastest rate in 17 months, partly due to a decline in new business.
Carsten Brzeski, economist at ING, said there were some encouraging signals for industry, such as an apparent end to the inventory build-up, and the economy ministry said the dip in industry and construction might have bottomed out after a weak patch over the summer months.
The German economy, once the envy of the rest of Europe due to its strong growth rates even during much of the euro zone crisis, contracted in the second quarter and only just skirted a recession in the third.
Prospects for the final quarter are somewhat brighter, with business and investor sentiment improving in November after a long run of declines, while consumer morale – a key indicator given that private consumption is a major growth driver this year – has also picked up.
But the outlook is not entirely rosy: the Bundesbank last week slashed its forecasts for German growth this year and next, though its president said there were signs current weakness would soon be overcome.
Reporting by Michelle Martin; Additional reporting by Rene Wagner; Editing by Stephen Brown