Industrial production in Germany declined in March as cold and wet weather kept building sites shut and production of factory machinery fell. Output, adjusted for seasonal swings and inflation, fell 0.5 percent from February, the Economy Ministry in Berlin said today.
The slower pace of global economic expansion as well as the stronger euro are eroding demand for cars and chemicals made in Germany while a cold Easter offset gains in construction output made during the mild winter. Record oil prices and higher credit costs also whittle away spending power and cloud the investment outlook. Export and manufacturing orders both fell in March.
Construction output fell 12.3 percent in March, the ministry said in a statement. According to the German weather service, March was ``particularly wet'' and the second half ``wintry.'' The production of investment goods fell 1.8 percent in March, while at the same time, energy output gained 5.5 percent in the month and the production of intermediate goods rose 1.1 percent.
Germany's expansion is losing momentum after the collapse of the U.S. subprime mortgage market sparked global writedowns and pushed up lending costs. The International Monetary Fund in Washington last month cut its global growth forecast and said the world economy faces a 25 percent chance of recession.
Factory orders from other euro-area states fell 3.5 percent last month, compared with a 2.1 percent gain from non-euro area countries, the Economy Ministry in Berlin said yesterday. About 40 percent of German exports are shipped to the euro region.
Still, services growth in Germany accelerated in April, the Royal Bank of Scotland Purchasing Managers Index showed this week. The index rose to 54.9 from 51.8 in March and some industry sectors are still weathering the headwinds.
German business confidence declined for the first time in four months in April. Investors also became more pessimistic. European manufacturing growth slowed for a third month in April and confidence dropped to the lowest in 2 1/2 years.
In the euro region as a whole, manufacturing growth slowed for a third month in April and confidence dropped to the lowest in 2 1/2 years. Retail sales fell 1.6 percent in March from a year earlier, the European Union's statistics office said yesterday. That's the biggest drop since at least 1995.
Companies are also grappling with the euro's 13 percent gain against the dollar in the past year, which threatens to erode exports by making them less competitive. The currency hit a record $1.6019 on April 22. Crude oil prices have doubled in the past year and breached $120 per barrel for the first time this week.
The German economy may expand 1.8 percent this year instead of a previously projected 2.2 percent, the leading government- sponsored research institutes said April 17. Growth will slow to 1.4 percent in 2009, less than the economy's long-term average of 1.5 percent, they forecast.