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Valentina Romei in London

German industrial production contracted unexpectedly in August, driven by a fall in the automotive industry and pointing to an uncertain recovery in Europe’s largest manufacturing economy.

Output fell 0.2 per cent in August compared with the previous month, from a revised 1.4 per cent expansion in July, data from the office for national statistics revealed on Wednesday.

The monthly contraction fell well short of the 1.5 per cent expansion forecast by economists polled by Reuters.

Overall, German industrial output was 9.6 per cent below the level of August 2019, suggesting a long path to a full recovery.

“While the outlook is better than in some countries, helped by Germany’s generous fiscal support and kurzarbeit scheme, and strong export demand from outside the eurozone, a full recovery will not take place for a long time,” said Andrew Kenningham, chief Europe economist at Capital Economics.

The fall was largely driven by the biggest branch of the manufacturing industry, the automotive sector, where production fell 12.5 per cent in August compared with the previous month. July recorded a strong increase but analysts attributed part of the large fall to more companies implementing their summer shutdowns in August this year.

In August, automotive production was still 25 per cent below the value in February before the pandemic hit Europe.

However, the contraction was widespread with consumer goods down by 1.3 per cent and capital goods by 3.6 per cent.

Industrial production data is released the day after the forward-looking measure of factory orders, which showed stronger than expected monthly growth, suggesting output could return to growth in September.

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