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Economy in Brief

German IP Drops in October
by Robert Brusca  December 9, 2013

German industrial production fell by 1.2% in October, marking the second monthly drop in a row. In September IP dropped by 0.7%. German industrial output is now falling at a 1.5% annual rate over three months, faster than its 1.3% annual rate of decline over 6-months. Over 12-months IP is up at a 1.1% annual rate.

In the new quarter IP is falling at a 6.7% annual rate led by a 17.1% annual rate of decline in capital goods. The capital goods sector is usually the leading sector for German output. Consumer goods output is also falling in the quarter to date, but intermediate goods output is advancing at a 6.5% annual rate.

Manufacturing IP also fell for the second consecutive month. It is also falling sharply, at a -6.1% annual rate in the new quarter-to-date. But manufacturing IP is advancing on balance over the last three-months. It is not showing the same overall deceleration as overall IP. The output of construction sector goods is lower by a 3.8% in October alone and is dropping at a 21.9% annual rate in the quarter to date.

Other early European reporters of IP data show a mixed picture. Spain, Portugal and Norway show output declines in October while Ireland and the UK report gains. But in the quarter to date, IP is gaining in Spain, the UK and Norway. Output is declining in the quarter to date for Ireland and Portugal.

The UK shows steady if somewhat moderate output growth rates on trend. Spain shows acceleration. Ireland and Portugal show clear negative trends in play while Norway displays a decline in output over three-months that contrasts with growth rates over longer horizons.

On balance the early news on EMU concerning IP is mixed to the weak side. But industrial output can be quite volatile. The German result for October is heavily affected by weakness in the construction sector. Still German manufacturing output also is lower in September as well as October, but it has a firmer trend than does overall German IP.

The German report for October is not a major disappointment, but it is disappointing. Even stripping out the weakness in construction we are left with some considerable weakness in Germany industry.

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