German industrial output higher than projected in July

German industrial output was higher than forecast in July, indicating Europe's largest economy would stage a recovery in the third quarter, Bloomberg reported.

Production, adjusted for seasonal swings, was up 1.9 per cent from June, when it expanded a revised 0.4 per cent, according to the economy ministry in Berlin.

Production was up 2.5 per cent from a year ago when adjusted for working days.

The German economy, which declined 0.2 per cent last quarter, is seen as critical for the revival of the 18-nation euro area as uncertain conditions due to turbulence in the Middle East and Ukraine, have hurt growth.

The European Central Bank yesterday slashed interest rates to a record low and announced asset purchases, a measure aimed at boosting inflation and restarting the recovery in the region.

Bloomberg quoted Evelyn Herrmann, European economist at BNP Paribas SA in London as saying, while there had been a lot of uncertainty, German industry was generally in sound health.

He added, with factory orders up in July, he thought the downside risks were off.

According to a report yesterday, manufacturing orders shot 4.6 per cent in July, the most in over a year, as demand for investment goods from outside the euro area jumped.

Meanwhile, Reuters reported Carsten Brzeski, senior economist at ING as saying German industrial production rebounded in July, providing further evidence that the euro zone's largest economy should return to growth in the third quarter.

According to commentators, though sentiment indicators had remained subdued about the Ukraine crisis, hard data had been more upbeat, with figures today showing industry orders were up at their strongest rate in over a year in July.

Brzeski added, that this week's industrial data encouraged the view that the contraction in the second quarter was rather a one-off than the start of a trend downturn.

Factories rolled out 5 per cent more capital goods, especially cars, and produced 0.8 per cent more intermediate goods.

Construction was also up substantially, though energy production was down.

"The manufacturing industry had an encouraging start to the third quarter," the Economy Ministry said in a statement.

The ministry further said, late summer holidays had noticeably boosted output in July but said the data nonetheless pointed to a continuation of the positive basic trend in manufacturing, "to the extent that geopolitical developments allow".