German industrial output posts sharpest drop in 23 months

German industrial production posted its steepest fall in 23 months in July, data showed on Wednesday, in a further sign that Europe’s largest economy is set for a slowdown.

The data, published a day after news of a surprisingly weak rise in industrial orders, added to concerns that the German economy is losing steam as lower demand from emerging markets such as China and concerns about the consequences of Britain's decision to leave the European Union are weighing on exports.

“Companies in the industry sector continue to adopt a wait-and-see approach because of sluggishness in the global export markets,” the economy ministry said in a statement.

Industrial output fell 1.5 per cent on the month, the data showed, confounding the consensus forecast in a Reuters poll for an increase of 0.2 per cent. A 1.8 percent rise in output in the construction sector and a surge of 2.6 per cent in energy output were not enough to offset a 2.3 per cent fall in manufacturing, the data showed.

Brexit vote

ING economist Carsten Brzeski said it was impossible to link stagnating industrial output to one single factor, adding: "The trend already started long before the British referendum but clearly the Brexit vote should have been one of the main drivers behind the sharp July drop.

“More generally speaking, the German industry seems to suffer from weaker activity in China, struggling euro-zone peers and a general shift away from manufacturing towards services.”

Nordea Bank analyst Holger Sandte said: "All in all, this is more proof that the manufacturing sector is no longer a driver of growth in a world that is increasingly dominated by services." – (Reuters)