This Was Not So Unexpected


Not for me at least. Germany is struggling, there is no easy and rapid cure. Equally one month thigs go up, and the next they come down. Or this month they go down and next month they go up. What you shouldn't expect is a clear and pronounced upward march.

German industrial production unexpectedly fell for a second month in September, held back by the effect of summer holidays, a government report showed, a sign the way out of recession for Europe's largest economy may not be smooth. Production at factories, construction sites, utilities and mines dropped 1.2 percent after declining 3.7 percent in August, the Economics and Labor Ministry in Berlin said in a faxed statement. The median forecast of 31 economists surveyed by Bloomberg News was for a monthly gain of 2 percent.

"There's a lot of talk about hope that we have bottomed out,'' said Robert Koehler, chief executive officer of SGL Carbon AG, the world's largest maker of carbon and graphite products. ``I'm not sure if we'll really see top-line growth worldwide.'' At least six reports in the past four weeks, from rising factory orders to falling unemployment, indicated the economy is reviving amid an acceleration in U.S. growth. Still, companies' third-quarter earnings reports have been mixed. SGL Carbon will cut more jobs in coming years and may shed one of its four units after forecasting a loss for this year and little- changed sales in 2004. Bayerische Motoren-Werke AG, the No. 2 luxury car maker, raised profit for the first time this year last quarter. The Economics and Labor Ministry, which said the summer holidays curbed production in September, said it expects industrial output figures for that month to be revised ``markedly'' higher.

Bundesbank President Ernst Welteke estimates Germany's $2.3 trillion economy grew 0.2 percent last quarter. The third-quarter gross domestic product reports is scheduled to be released by the Federal Statistics Office in Wiesbaden on Nov. 13. The euro, which has appreciated more than 13 percent against the U.S. dollar in the past year, may have hurt production. The single currency rose to a record of $1.1933 in late May. It traded at $1.1427 at 11:51 p.m. in Frankfurt. "When the euro rises, we lose sales,'' said Rudolf Winning, chief financial officer of Zapf Creation AG, Europe's largest maker of dolls. ``A rate of $1.10 to $1.15 reflects the fundamentals of the economy.'' The company last week cut in half its estimate for full-year operating profit partly on the euro. In a two-month comparison, which smoothes out short-term swings, German industrial production fell 2.9 percent in the eight weeks through September from the previous two-month period, the ministry said.
Source: Bloomberg
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