German industrial output posts biggest decline

Berlin - German industrial production posted its biggest fall in nearly two years in May, adding to signs that global tensions have weighed on Europe's largest economy.

Output fell by a more-than-forecast 1.8% in May to post its third monthly decline. The figure was a reversal from a first snapshot of the data four weeks ago.

The Ministry of Economics on Monday also revised its April figures to show a drop of 0.3%.

"German industrial production dropped sharply in May, showing that earlier risk factors like slowing emerging market economies, including China, and geopolitical conflicts do have an impact on the German economy," said ING Bank economist Carsten Brzeski.

Analysts had expected the data would show output had stagnated in May. The ministry had previously reported a 0.2% gain in May industrial production.

But the ministry said on Monday: "Sentiment indicators and the overall economic fundamentals suggest the upswing in industrial production will continue during the course of the year after a weaker second quarter."

The May output data followed the release of a batch of figures and indicators which have also pointed to the stand-off between the west and Russia over Ukraine, combined with weaker emerging economies, as having hit economic confidence in Germany.

"Geopolitical reasons may have contributed" to the May decline in industrial production, the ministry said.

It also said the timing of public holidays in May was likely to have temporarily weakened output.

In addition, the ministry said the mild winter weather distorted the figures for the building sector with construction output slumping by 3.9% in May.

While output of the manufacturing sector fell 1.6%, production of intermediate goods used in the production process slumped 3%. Consumer goods fell 3.5%.

However, investment-goods output edged up 0.3% and energy production gained 1%.