German industrial output falls in Q3, experts warn sector remains weak

Although output in the automotive sector surged by 12.3 percent in September, growth in other key industrial sectors, particularly machinery and metal manufacturing, remained subdued.

BERLIN, Nov. 7 (Xinhua) -- Germany's industrial production fell 0.8 percent in the third quarter (Q3), official data showed on Thursday, as a 1.3-percent rebound in September failed to offset continued weakness in the manufacturing sector.

The September uptick was weaker than analysts had expected, following a sharp drop in August when car production plunged due to factory shutdowns during the summer holidays and production changeovers.

The Federal Statistical Office (Destatis) said output in the automotive sector rose sharply by 12.3 percent in September, compared with a 16.7-percent slump in the previous month.

As Germany's largest industrial branch, the automotive sector has recently shown further signs of improvement. According to a monthly sectoral report released by the Munich-based ifo Institute on Wednesday, sentiment in the German automotive industry improved significantly in October, with the related index rising from -21.3 to -12.9 points and reaching the highest level in two years.

Although the reading remains in negative territory, ifo said carmakers and suppliers were more optimistic about the months ahead, as demand has increased markedly and far fewer companies reported a lack of new orders. Capacity utilization in production was now at a comparatively high level, the institute added.

By contrast, other key industrial sectors showed weaker performance in September, Destatis said, particularly machinery and metal manufacturing.

"The increase in September fell short of expectations and was not enough to make up for the losses in the previous month," said Nils Jannsen, senior researcher at the Kiel Institute for the World Economy (IfW).

In a statement, the Federal Ministry for Economic Affairs and Energy said the September recovery, driven by volatility in the automotive sector, could not be regarded as evidence of a fundamental turnaround in Germany's sluggish industry. "Overall, industrial activity remains weak," the ministry said, noting that energy-intensive sectors such as chemicals, glass and paper largely stagnated or reported declines.

Separate data from Destatis on Wednesday showed that industrial orders rose 1.1 percent in September after four consecutive months of decline, but fell 3 percent in the third quarter overall.

Jannsen said that industrial output in Germany has stabilized at a low level this year, while incoming orders have remained broadly flat. He added that the country's business environment has deteriorated, reflected in weaker competitiveness and subdued private investment, which could continue to weigh on manufacturing in the near term.

Analysts nevertheless expect the federal government's spending plan for next year, which includes record levels of public investment, to help improve infrastructure and thus support industrial growth over the longer term.

Carsten Brzeski, global head of macro at ING Research, said German industry would fluctuate between some cyclical relief and continued structural weakness. He expected only "very tentative improvements" in industrial production over the coming months, warning that U.S. tariffs and weak investment intentions continue to weigh on the sector and argue against any premature optimism. ■