Rising industry output points to German economic upswing

BERLIN: German industrial production rose by more than expected in April, data showed on Thursday, reviving hopes the sector can extend an upturn in Europe’s biggest economy after orders data disappointed.

Industrial output rose by 0.8 percent on the month after dropping by an upwardly revised 0.1 percent the previous month, data from the Economy Ministry showed. That beat the consensus forecast in a Reuters poll for a gain of 0.5 percent.

The upturn was driven by a surge in energy production and factories churning out more intermediate goods. But construction activity edged down and fewer consumer goods rolled off production lines.

“The German economic recovery has entered its ninth year and there are no signs that this recovery could come to an abrupt halt,” said Carsten Brzeski, an economist at ING.

“Today’s industrial production data have not only confirmed this growth picture but actually provide further evidence that this recovery could gain even more momentum,” he added.

Other recent data has painted a mixed picture of the sector.

The output figures follow data on Wednesday that showed industrial orders dropping far more than expected in April, as factories lacked new contracts for big ticket items.

Figures from the VDMA industry association have shown engineering orders falling but a recent purchasing managers’ survey showed factory output increasing at the strongest pace in more than six years, as demand from German and foreign clients rose.

The Economy Ministry said production remained on an upward trend, with solid order levels and sales plus a strong business climate pointing to a continued upturn in the industrial and construction sectors.

The German economy pulled off 1.9 percent growth last year on rising private consumption, state spending and construction. It continued to expand early this year, with higher exports helping to drive 0.6 percent growth in the first quarter.

Ulrike Kastens, an economist at Sal. Oppenheim, said the industrial sector had experienced a good start to the second quarter and she expected second quarter growth to roughly mirror the level of the first three months of the year.

Meanwhile, the European Central Bank (ECB) kept its money taps wide open on Thursday but dropped a reference to possible interest rate cuts, an unexpectedly hawkish move as euro zone growth accelerates.

“The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases,” the bank said, removing a longstanding reference to lower rates.

It kept its easy money policy unchanged as widely expected, however, including its 2.3 trillion euro ($2.59 trillion) bond-buying program and sub-zero interest rates, despite resistance from cashrich Germany.