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UPDATE 1-Weak German industry output adds to signs of Q2 slowdown
August 7, 2014 / 6:46 AM / 3 years ago

UPDATE 1-Weak German industry output adds to signs of Q2 slowdown

(Adds detail, economist comment, context)

By Alexandra Hudson

BERLIN, Aug 7 (Reuters) - German industrial output rose just 0.3 percent on the month in June, missing a forecast rise of 1.3 percent, as fears over the crisis in Ukraine weighed, adding to signals that Europe’s largest economy may have stalled in the second quarter.

June’s faint gain in output showed some recovery from May’s monthly fall of 1.8 percent, as construction activity picked up, but analysts said it was “too little, too late”.

“The second quarter was weaker, as expected, after industrial output was exceptionally strong in the first quarter due to the mild winter... geopolitical events may have also weighed,” the ministry said.

“Ordering activity and sentiment indicators signal moderate development in output for now. The positive basic trend will continue,” it added.

The disappointing output figure comes a day after data showed industrial orders fell in June at their steepest rate since September 2011 on weaker euro zone demand and poor bulk orders, again affected in part by uncertainty over Ukraine which has hit at a time when the euro zone is still vulnerable.

“This is less than expected... and it is too little to turn the second quarter into a growth quarter,” said Christian Schulz, analyst at Berenberg Bank.

“The Putin-factor plays a role because of the Ukraine crisis. Some export firms have become more cautious and are ordering less, so less is being produced,” he added.

The Economy Ministry said industrial production was 1.5 percent lower in the second quarter than in the first.

The German economy grew at its strongest rate in three years in the first quarter but that was largely due to mild weather and it is generally seen slowing or even stagnating in the second quarter before accelerating again in the third.

The strength of that third quarter acceleration is now in question however, particularly since the European Union and United States introduced a new round of sanctions on Russia.

Preliminary second-quarter gross domestic product (GDP) figures are due out next Thursday.

“After today’s data there is a strong risk that GDP will have fallen slightly,” Schulz said. (Reporting by Alexandra Hudson; Editing by Toby Chopra)

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