German imports, industrial production fall

A second fall in German imports in three months sent a worrying sign on Wednesday that even the domestic mood in the euro zone's last bastion of economic hope may be weakening under the pressure of the bloc's deepening debt crisis. Exports and industrial output also dropped in June, data showed, following a turn for the worse in surveys of economic sentiment over the past month as retail sales dipped and unemployment rose.
Production fell 0.9 percent on the month on a seasonally adjusted basis, driven by declines in manufacturing, consumer goods and capital goods output, and adding to a new central bank forecast that put France in recession in the third quarter. "With the supposedly ultra-competitive German manufacturing sector in recession, the omens for the rest of the euro zone economy are extremely worrying," said Jonathan Loynes, Chief European Economist at Capital Economics. "The annual rate remained steady at -0.3 percent, but business surveys such as the PMI point to much steeper rates of contraction over the coming months."
Germany's industrial output remains relatively robust compared to other euro zone countries like Spain, where calendar-adjusted industrial output fell for a 10th straight month to 6.3 percent year-on-year in June. But Germans purchased 2.8 percent fewer goods from their European contemporaries in June than a year ago, bad news for companies hanging their hopes on demand from the bloc's richest consumer market.
On a seasonally adjusted month-on-month basis, imports fell 3.0 percent in June, reversing a 6.2 percent gain in May and falling much more sharply than the 1.5 percent drop forecast by economists in a Reuters poll. While the German economy has traditionally been export-driven, many economists expect private consumption to be the most important driver of growth this year as Germans benefit from low unemployment and higher pay in the chemical and engineering sectors following successful wage negotiations.
One recent survey did show consumer morale in Germany inched up heading into August but the sharp fall in imports widened the seasonally-adjusted trade surplus to 16.2 billion euros. France's trade deficit widened to 5.99 billion euros in June from 5.47 billion euros in May, the finance ministry said on Wednesday. The Bank of France cut its forecast for the third quarter to show a second successive quarter of contraction - the technical definition of a new recession. German manufacturers are already feeling the effects of a slowdown in China, with BASF, the world's top chemicals maker, receiving no major orders from China this year and Siemens, Europe's biggest engineering conglomerate, saying major sales to China were becoming rare.