June 6, 2012 / 10:43 AM / 7 years ago

UPDATE 1-Germany catches "euro crisis virus" as output slips

(Adds detail, quotes)

By Michelle Martin

BERLIN, June 6 (Reuters) - German industrial output stumbled more than expected in April, fuelling concerns that Europe’s largest economy is running out of steam and succumbing to the crisis engulfing much of Europe.

Production slid 2.2 percent in April, Economy Ministry data showed on Wednesday, below the consensus forecast in a Reuters poll of 35 economists for a 1.0 percent decline and also below the lowest forecast for a 2.1 drop.

“Welcome to the euro crisis, Germany,” said ING senior economist Carsten Brzeski. “(The drop provides) evidence that the economy has finally caught the euro crisis virus.”

The Economy Ministry said the steep fall came after strong growth in March and as workers took an extra day off before the May Day holiday. The data for March was, however, revised downwards to 2.2 percent from a previously reported 2.8 percent.

The fall was broad-based, with only energy showing growth of 2.4 percent. The construction sector was the hardest hit, shrinking by 6 percent in April but the ministry said this figure was above levels seen in the first quarter.

“Even if it will not fall, the euro zone’s last stronghold is faltering,” Brzeski said. “For the time being, it is a stabilisation at a high level. However, latest data clearly indicate that Germany is not an economic island.”

Data released on Tuesday had already shown German industrial orders fell at their fastest rate since November 2011 in April as orders from abroad dried up, adding to signs that Germany is heading for a slowdown.

The steep drop in output adds to a string of recent disappointing data from Germany, including a survey released last week which showed the country’s manufacturing sector contracted at the fastest pace for almost three years in May as flagging demand from the euro zone and further afield tests its resilience to the debt crisis.

The euro zone crisis is also beginning to bite in Germany’s services sector, which grew at the most sluggish pace in six months in May, more slowly than originally estimated, as new orders and backlogs of work dropped. (Reporting by Michelle Martin, editing by Gareth Jones)

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