Wednesday, January 09, 2008

German Industrial Output Falls in November 2007

German industrial production, exports and retail sales have all unexpectedly declined recently, suggesting growth in Europe's largest economy is slowing. Industrial production fell 0.9 percent in November from October, the Economy Ministry in Berlin said today. Sales abroad, adjusted for working days and seasonal swings, dropped 0.5 percent from October and retail sales dropped 1.3 percent, the Federal Statistics Office in Wiesbaden said in a separate statement.

The German economy is losing momentum as a stronger euro makes exports less competitive and near-record oil prices drive up inflation, leaving households with less money to spend. German Finance Minister Peer Steinbrueck said today the government may cut its 2008 growth forecast.

Construction output was also down in November 2007, falling 1.6% from October.

Germany's IWH institute last month cut its growth forecast for 2008, citing both weaker exports and consumption. The pace of expansion may slow to 1.7 percent this year from 2.5 percent in 2007, Halle-based IWH said Dec. 20. It previously forecast growth of 2.5 percent for this year. The German government may lower its 2008 growth forecast when it publishes a new projection later this month, Steinbrueck said in an interview today.

``I think we're not going to face the same economic growth rate as in 2007,'' Steinbrueck said. ``Perhaps 1.9 percent or 1.8 percent'' instead of the 2 percent currently projected.

Adding to signs of slowdown, German business confidence fell to the lowest in almost two years in December and investors were the most pessimistic since January 1993.

The euro increased 11 percent against the dollar last year, reaching a record $1.4967 on Nov. 23. The currency, used in 15 European countries, traded at $1.4704 at 1 p.m. in Frankfurt. Todays report showed that exports rose 3.2 percent during 2007. The trade surplus, adjusted for seasonal swings and working days, widened to 19.8 billion euros -- the most since records began in 1950 -- as imports dropped more than exports.

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