German industrial production rebounded in November from October but the upward trend is expected to weaken as orders remain subdued, partly due to lower demand for cars, the economics ministry said Friday.
German industrial production rebounded in November from October but the upward trend is expected to weaken as orders remain subdued, partly due to lower demand for cars, the economics ministry said Friday.

The 0.7% seasonally adjusted monthly rise in production, which was somewhat below expectations, was driven by strong output of consumer and durable goods, while the energy sector was weak, data from the ministry showed.

Economists in a Dow Jones Newswires survey had forecast a rise of 1.0% on the month in seasonally adjusted terms, after an upwardly revised 1.7% monthly drop in October.

"The recovery of production in the manufacturing sector is continuing despite a setback in the previous month. The upward trend, however, is likely to weaken due to the currently measured pace of manufacturing orders," it added.

The car sector, which in the past boosted output due to the government's so-called cash-for-clunkers scheme, is now a drag on output, it said.

BNP Paribas SA economist Ken Wattret said some leading indicators point the same way.

"Overall, the industrial activity data released for the fourth quarter to date are indicative of decent GDP [gross domestic product] growth....sustaining the recovery, however, is likely to be difficult against a backdrop of continued weakness in consumer demand," Wattret said.

Still, some economists said the production data still show a positive trend and output is set to rise throughout the first quarter.

"Today's figures, combined with the good export figures from this morning, hint at a pretty strong increase in real gross domestic product in the fourth quarter," said Ralph Solveen, economist with Commerzbank AG. "We expect that industrial production will continue to rise in the coming months...although the momentum will slow."

Alexander Koch, economist with UniCredit Research, said that despite the moderation in order dynamic, the outlook for a continuing solid recovery in industrial activity "remains intact" in the short term and there should be "another respectable rise in production volume in the first quarter of the new year."

Germany 's economy is expected to slowly emerge this year from its worst recession in 60 years, with the government forecasting 1.2% growth after an estimated economic contraction of 5% last year.

The severeness of the economic downturn is still evident in the weak annual figures for industrial output. Production was down 8.0% in November in workday-adjusted terms, or 5.1% in unadjusted terms, the ministry said.

The monthly rise in output in November was driven in part by a 0.9% increase in the manufacturing sector in seasonally adjusted terms. In October, manufacturing fell 1.8% on the month.

Of this component, consumer and durable goods production rose, with durable goods output up 2.5% on month from October, and consumer goods production up 1.6%.

Output of intermediate goods--part of the manufacturing process--rose 1.1% on the month in November after a rise of 0.7% in October. Production of capital goods was up just 0.3% in November after a 4.2% drop in October, the ministry said.

Construction output rose 0.7% on the month in seasonally adjusted terms, after a 1.2% drop in October.

The government implemented a combined EUR88.5 billion in fiscal stimulus last year and this year, which is gradually feeding through to businesses.

Energy output showed the poorest performance, down 2.0% on the month after declining 0.9% the previous month.

Average industrial production for the October-November period was up 0.1% from the August-September period.

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