RTTNews - German industrial production unexpectedly dropped in June after a strong increase in May, the Federal Ministry of Economics and Technology said Friday.

The seasonally adjusted industrial output fell 0.1% month-on-month in June after an upwardly revised increase of 4.3% in May. Economists had forecast an increase of 0.5% for June.

Simon Junker, an analyst at Commerzbank, said the small decline in June does not change the good prospects. Production should be past the trough and the surprisingly high number of orders announced yesterday gives reason to expect large increases in production in the months ahead.

Thursday, the ministry said factory orders in June rose 4.5% month-on-month in June after an increase of 4.4% in May. That was the biggest increase in two years.

Production of capital goods fell 0.9% and that of consumer goods was down 1.6%. Output continued to decline in the construction sector, down 1.4% in June.

Intermediate goods output grew 1.8% in June following the 4.1% rise in May. Energy production rose 0.4%, slightly slower than a 1.1% rise in May.

On an annual basis, the working day adjusted industrial output dropped 18.1%, bigger than the expected fall of 17.5%. This follows a revised fall of 17.6% in May.

The unadjusted industrial production was down 19.9% year-on-year in June after the 18.4% decline in May. Output has been falling since October 2008.

Earlier in the day, data released by the Federal Statistical Office showed that the calendar and seasonally adjusted exports climbed 7% month-on-month and imports rose 6.8% in June.

Recent improvement in exports and industrial orders suggests that the biggest Eurozone economy is on the road to recovery. Exports and industrial production are vital for the German economy.

But growth should fall back after the turn of the year. The aftereffects of the financial crisis and the still falling real estate prices in many countries tend to argue for an anaemic upward movement in the medium-term, the analyst said.

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