Has Germany's industrial engine stalled?

The 0.9 per cent drop in German industrial production in September, released this morning, was worse than expected, with expectations of a 0.2 per cent increase. August's figure of 1.6 per cent was revised up from 1.4 per cent.

Having gone up by four per cent in the first half of this year, production has since fallen by 0.5 per cent over the last three months. Jonathan Loynes of Capital Economics says this could "shave up to 0.4 per cent off GDP growth", compared to the second quarter's 0.7 per cent outturn.

He points out that, whilst monthly IP numbers are not always a good guide for the industrial component of GDP, and that it is too soon to "write off German industry altogether", this morning's data does suggest that the country's "supposed growth engine may have slowed somewhat, if not stalled".

But Loynes says that September's 3.3 per cent jump in orders (released yesterday) does point to stronger output ahead. Moreover, business surveys continue to give a reasonably upbeat picture. Having said that, he adds, "hopes that the sector would fuel a further acceleration in German growth and help to drive a stronger recovery in the euro-zone as a whole are starting to look rather more doubtful."