World Economy

German Industrial Output Surges

German Industrial Output Surges
German Industrial Output Surges

German industrial output surged in February and the trade balance swelled as the engine room of Europe’s largest economy fired on all cylinders to satisfy demand at home and abroad, assuaging angst about rising protectionism.

Industrial output rose by 2.2% on the month, matching January’s expansion in what the economy ministry said had been an “extraordinarily” robust start to the year. A Reuters poll had pointed to a dip of 0.1% in February.

“German industry finally returns as a growth engine,” said ING economist Carsten Brzeski, pointing to a 13.6% surge in construction in February after a weak end to last year.

Seasonally adjusted exports rose by 0.8% on the month, while imports fell by 1.6%, according to the latest data from the Federal Statistics Office. A Reuters poll had pointed to exports and imports both dipping by 0.5%.

The upshot of the rise in exports and fall in imports was an expansion in Germany’s trade surplus to €21 billion ($22.24 billion) in February from €18.9 billion ($20.02 billion) in January.

The readings are the latest in a batch of strong German economic readouts and will help Chancellor Angela Merkel burnish her economic credentials before a September 24 federal election, when she will seek a fourth term.

In March, German business morale hit its highest level in nearly six years, adding to signs that the German economy made a strong start to 2017, helped by rising global demand for cars and machinery.

Growth in services also accelerated further in March, pointing to healthy growth in the first quarter.

“All in all, today’s good data bode well for growth in the first quarter and suggest that buoyant soft indicators have been right,” Brzeski said.

“German new orders have woken up from hibernation,” said Brzeski, adding that bookings seemed to be extremely sensitive to seasons and the weather.

“Looking through this high volatility, the trend for order books is slightly positive, though still not as positive and strong as current confidence indicators are suggesting.”

February’s increase was driven by the strongest surge in domestic demand since May 2011, with companies in Germany ordering 8.1% more goods than they ordered in January, when they had significantly scaled back orders.

Foreign orders failed to contribute, with a breakdown showing bookings from the eurozone fell by 2.4% while non-eurozone contracts increased by 1.6%.

The wider current account surplus expanded to €20.4 billion from €14.2 billion in January, the data showed.



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