German Industrial Output Slump Signals Weaker GDP Growth: Capital Economics

(RTTNews) - The slowdown in Germany's industrial production points to a weaker GDP growth in the fourth quarter, Capital Economics Chief European Economist Jonathan Loynes said.

Capital Economics forecasts that Germany's economic growth will likely weaken in the fourth quarter from third quarter's 0.3 percent expansion.

Data came out in the beginning of the year continue to have a distinctly soft tone both in Germany and across the currency union, maintaining the pressure on the ECB to provide more policy support very soon, the firm noted.

Figures released by the Federal Statistical Office revealed that industrial production unexpectedly dropped 0.6 percent month-on-month in December, after gaining an upwardly revised 2.4 percent in November. The weakness mainly reflected a fall in energy production. Core manufacturing also recorded a drop in output.

On an annual basis, however, industrial production advanced 2.6 percent in December, which was slightly slower than November's expansion. In the fourth quarter, production advanced by 0.2 percent.

On the positive side, the manufacturing PMI continue to paint a brighter picture of the outlook for industry, and for the German economy as a whole, the economist said.