German Economy: Industrial Production Gains Strength During Q1 In Euro Zone's Strongest Economy, But Analysts Say It Could Be A Blip

 @MalikFromLA
on May 08 2013 10:47 AM

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Germany's production sector gained momentum during Q1 of 2013, but the rest of the year might not bode as well.

March data show the country's second consecutive month of gains in output. Production rose by 1.2 percent in March, which was a stronger performance than analysts anticipated -- the consensus expectation was a 0.1 percent fall.

This rise in production occurred despite a 3.1 percent monthly fall in construction. It also contributed to an overall 0.2 percent gain for the entire quarter, which kept the sector from experiencing the dreaded measure of two consecutive quarters of decline as the previous quarter was down 2.6 percent. However, analysts won't call it a comeback just yet.

"A sustained and robust recovery still seems unlikely," Ben May, European economist with Capital Economics, said in a May 8 research note. "Following the sharp falls in production in the latter part of 2012, a rebound at the beginning of this year was always a distinct possibility."

When compared to the same period of 2012, industrial production has actually decreased by 2.5 percent, according to Trading Economics.

Industrial production measures changes in output for manufacturing, mining and utilities, which are important in forecasting GDP and inflation.

May adds that, because industrial sentiment fell in April and since Germany's manufacturing PMI points to further falls in production, he doesn't expect production will experience a sustained strengthening over the year. That could be coupled with a stagnant GDP.

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