German industrial output sees biggest fall in two years

Monday 07 July 2014 08.45
German industrial output decreased by 1.8% in May
German industrial output decreased by 1.8% in May

German industrial output fell 1.8% on the month in May, its biggest drop in more than two years, the Economy Ministry said.

The Ministry blamed the way public holidays fell in May but also pointed to weakness in construction and geopolitical effects. 

The drop was a surprise - the consensus forecast in a Reuters poll was for industrial output to be unchanged.

The ministry also slightly downwardly revised April data to -0.3% from a previous -0.2%. 

"After a strong first quarter, industry output weakened over the last months. Besides the effect of the bridge days in May and weakness in construction, which was to be expected after the mild winter, geopolitical factors may also have played a part," the ministry said in a statement. 

German economists said that the second quarter of the year is gradually turning into a massive disappointment. So far, May has brought disappointing retail sales, falling industry orders and now a significant fall in production. 

The Economy Ministry did not specify which geopolitical areas were of concern but economists such as the influential Munich-based Ifo think tank say business is worried about the Ukraine crisis and the impact on oil prices of the insurgency in Iraq. 

Following 0.8% growth in the first three months of the year, the German economy is widely expected to slow in the second quarter. 

However, the government forecasts growth of 1.% for the year as a whole on the back of strong domestic demand and a healthy jobs market.