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German Factory Production, Exports Drop

German Factory Production, Exports DropGerman Factory Production, Exports Drop

German factory production and exports fell in September, according to official figures released Tuesday, which analysts said points to flat third quarter GDP growth for Europe’s largest economy.

The economy ministry said industrial production dropped 1.8% in September over August, according to season- and calendar-adjusted figures. That followed a robust 3% rise in August, which was revised upward from the 2.5% growth initially reported, and a 1.5% drop in July, AP reported.

The ministry said overall production in the third quarter was up 0.3% over the previous quarter and that it expects a “slight uptick” in factory production growth in the coming months.

Meantime, Germany’s trade surplus narrowed slightly as both exports and imports decreased in September.

According to the Federal Statistical Office, exports dropped 0.7% in September over August, while imports fell 0.5% in season- and calendar-adjusted terms.

With exports of €106.4 billion ($117.7 billion) and imports of €82 billion, the trade surplus fell to €24.4 billion in September, or €21.3 billion in adjusted figures.

Exports to the US, China and the United Kingdom made up almost a quarter of the total, according to bilateral trade data, ING economist Carsten Brzeski noted.

“The German economy remains on an incredible roller-coaster ride. Down one minute, up the next,” Brzeski said. “The combination of Brexit uncertainty, a mature business cycle and political and economic uncertainty in many important trading partners keeps the industry treading water.”

He predicted “meager growth” when Germany releases its third quarter GDP figures next week.

 Construction Boom

Germany’s ZDB construction association on Tuesday raised its sales forecast for 2016 due to a building boom in real estate and higher state spending on infrastructure, suggesting the sector will propel growth in Europe’s biggest economy this year, Reuters reported.

ZDB head Hans-Hartwig Loewenstein said he expected sales growth of 5.5% to €106.5 billion this year and a further increase of 3% to €110 billion in 2017.

“Construction is doing well,” Loewenstein said, adding that firms were vying for skilled workers and prices for building services would rise by 2%.

Strong demand for homes is fuelling a construction boom that is helping to support the German economy at a time when exporters, who traditionally drive growth, are struggling due to a slowdown in some of their major markets such as China.

The property boom has been encouraged by the European Central Bank’s ultra-low interest rates, a growing urban population and unexpectedly high immigration over the past five years.

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