German factory output rebound suggests bottlenecks easing

BERLIN (Reuters) – German industrial output rose more than expected in July after three monthly drops, data showed on Tuesday, in a sign that factories are slowly overcoming supply bottlenecks which have been holding back a recovery in Europe’s biggest economy.

The Federal Statistics Office said industrial output, including construction and energy, increased by 1.0% on the month after a revised decline of -1.0% in June. A Reuters poll had pointed to a rise of 0.9%.

Output in manufacturing alone jumped by 1.3% as factories churned out more capital and consumer goods. Construction output rose 1.1% while production in the energy sector fell 3.2%.

“After the decline in industrial production in the second quarter, the third quarter got off to a friendly start,” the economy ministry said.

The mighty automobile industry increased its output by 1.9% and the machinery and engineering sector hiked production by 6.9%, the ministry said.

“Even if the supply bottlenecks with semiconductors, which have slowed down production, are likely to persist for a while, the output figures suggest that industry could have overcome its low point,” the ministry added.

The industrial output data followed an unexpected surge in industrial orders in July, hitting a post-reunification high and pointing to a solid start to the second half in the engine room of the euro zone’s largest economy.

The regained strength in German manufacturing comes at a time of weakness in household spending which was the main driver of overall economic growth in the second quarter.

Retail sales fell by far more than expected in July after two months of sharp increases which were caused by a pandemic-related rebound in household spending as COVID-19 curbs on shopping were gradually lifted in May and June.

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