German industrial output falls in August

Factories produced 1.2 percent fewer goods than in the previous month, the ministry said, blaming some of the weakness on the large number of summer holiday days in the month.

The decline was much steeper than a 0.1 per cent fall predicted by financial services firm FactSet.

The data did not yet factor in the possible repercussions of the Volkswagen scandal sparked by news in September the auto giant has cheated on emissions tests in 11 million diesel vehicles.

“The German industry is still struggling to gain momentum”, said Carsten Brzeski, chief economist at ING-DiBa.

But industrial orders fell 1.8 percent in August, pointing to waning demand from overseas, especially China and other emerging markets.

The economics ministry on Wednesday played down the sharp decline in industrial output during August, saying that it was largely caused by the late timing of the summer vacation. The Federal Statistics Office will release August trade data on Thursday.

“While order data in August were overall disappointing, it’s too early to fall into a panic about the economy because orders from within the country and the currency union amid all the volatility still point upward”, said Stefan Kipar, an economist at Bayerische Landesbank in Munich.

According to Destatis, the drop was led by production of capital goods such as machine and equipment which fell by 2.1 percent. “Let’s hope that history repeats itself”. However, she added, “the Volkswagen scandal and its effect on the German vehicle industry is a downside risk to growth going forward”.

“Nonetheless, even without this effect the trend for industrial production in recent months has pointed only sideways”, Solveen said.

In a sign of the slide, German steel distributor Kloeckner & Co. on Tuesday said it would not meet its third-quarter profit target, citing price declines and weak demand for steel and metal products.