Downbeat UK, German Manufacturing Data Add To Recession Fears

 
on April 05 2012 9:50 AM
An unexpected rise in German business confidence boosted European stock markets on Friday
An unexpected rise in German business confidence boosted European stock markets on Friday Reuters

A pair of unexpectedly downbeat economic reports from Germany and the U.K. on Thursday added fueled doubts that manufacturing could lift the region out of its recession.

German industrial output fell by 1.3 percent in February from the previous month, according to the Federal Statistical Office of Germany, undershooting the economists' consensus estimate of a 0.5 percent drop as compiled by Bloomberg News.

January's previously reported gain of 1.6 percent was also revised down to an increase of 1.2 percent.

Germany's construction plunged 17.1 percent while manufacturing production fell 0.4 percent, led by a 2.1 percent decline consumer goods output. The huge drop in construction was exacerbated by the unusually cold weather.

Still, the overall report has brought further signs that the former engine of the euro zone recovery [manufacturing] has gone sharply into reverse, Jonathan Loynes, Capital Economics' chief European economist, told Agence France-Presse.

U.K.'s Office for National Statistics reported that manufacturing output fell by 1 percent in February from the previous month, below economists' consensus estimate of a 0.1 percent increase as compiled by Bloomberg.

The decline was the biggest since April 2011.

The U.K. recovery is not to be taken for granted. We maintain our view that the economy will remain fragile during the first half of the year before gaining strength during the second half, said Blerina Uruci, an economist at Barclays, reported Bloomberg News.

From late 2010 to early 2011, manufacturing growth powered the euro zone's recovery from the Great Recession.

However, as the global economy slowed and the euro zone sovereign debt crisis forced austerity measures on peripheral members of the region, recovery stalled and the economy has had two successive quarters of economic contraction.

Recent economic reports, including those from Markit Economics Ltd.'s purchasing managers' index and the Eurocoin economic-activity gauge, confirm the euro zone's current recession.

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