German output rise halts slide

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WEST German industrial output rose a surprising 2.1 per cent in August, suggesting that the recession is evening out and another slide down is unlikely, writes Peter Torday.

The rise in August followed a revised fall of 0.8 per cent in July. Economics Ministry officials suggested that the provisional August figure may also be revised down. The original estimate for July was a rise of 0.5 per cent.

The pattern indicates that the western German economy is doing little more than bottoming out. But yesterday's news may allay fears that the economy was set for a further downturn in the third quarter, after an unsustainable build-up in stocks during the second three months of the year.

In the latest two months, production was broadly unchanged compared with the previous two months, but was 6.5 per cent down on a year earlier. The most marked production increases occurred in the output of capital goods. Output of consumer goods and construction was also higher.

However, Frankfurt economists remain gloomy about the immediate outlook, with the most optimistic looking for stabilisation of the economy at best.

In London, Alison Cottrell, international economist at Midland Global Markets, said: 'Basically the economy is moving sideways, but there are signs of life. Expectations for output continue to fall but the pace of decline is slowing. Confidence is not yet optimistic, but has moved up from historic lows.'

Later this week, economists expect further confirmation of continued stagnation. Forecasts for August industrial orders range from unchanged to a decline of 1 per cent. September unemployment is expected to rise by between 25,000 and 40,000 from August's 2.33 million.