German industrial output dropped by more than even the most pessimistic of forecasts in May, adding to a run of negative indicators that point to a sharp slowdown in Europe's largest economy. In seasonally adjusted terms, output fell by 2.4 percent on the month, the Economy Ministry said on Monday. A Reuters poll had pointed to a 0.4 percent rise. Forecasts ranged between a 1.1-percent fall and a 1.4-percent rise.
"These are alarmingly weak numbers," said HSBC Trinkaus analyst Stefan Schilbe. The weak output figures chimed with other recent economic indicators which have pointed to a slowdown in the German economy after it grew 1.5 percent on the quarter in the first three months of 2008, its strongest expansion since 1996. "This clearly adds to the evidence that German GDP growth will slow sharply from Q1's sharp 1.5 percent gain - an outright fall seems increasingly likely," said Jennifer McKeown, European economist at Capital Economics.
May's fall was marked by 3.9 percent drop in output of capital goods - the engineering goods German has a reputation for producing to a high standards. Strong foreign demand for capital goods has helped Germany be the world's largest exporter of goods since 2003. For years, foreign trade has been a key engine of growth, but a global slowdown now threatens to stall that driver.
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