(RTTNews) - The German industrial production declined more than expected in July, adding to existing fears of possible recession.

Friday, the Federal Ministry of Economics and Technology said industrial production declined 1.8% in July from the previous month, severe than the 0.5% fall expected by economists. In June, industrial output had grown 0.1%, downwardly revised from the 0.2% estimated initially.

The ministry reported that industrial production grew 2.6% year-on-year, following a 4% rise in June. On a working day adjusted basis, production was down 0.6%, while economists had predicted a 0.9% rise.

Both industry and construction sectors showed significant reduction in production. Construction output dropped 2% month-on-month in July and manufacturing output slid 1.9%. A 3.7% decrease was reported in the manufacture of capital goods, while consumer goods production slid 1.7%.

The ministry expects industrial production to be weak in coming months amid the worsening business climate and decline in orders.

A report released by the ministry on September 4 showed that industrial new orders fell for the eighth consecutive month in July due to the weakness in domestic demand. Industrial new orders declined 1.7% month-on-month in July, slower than June’s 2.6%. On an annual basis, orders fell 0.7% in July, significantly slower than the revised 6% fall seen in June.

Commenting on the German industrial output data, economist at BNP Paribas Fr�d�rique Cerisier said contraction of industrial output over the quarter seems almost inevitable, which reinforces the probability of another shrinking in GDP in the third quarter.

In the second quarter, the largest Eurozone economy had contracted in the second quarter for the first time in almost four years on reduced investment in construction as well as machinery and equipment as well as a slump in household spending. The economy contracted 0.5% sequentially in the second quarter, after expanding 1.3% in the first quarter.

The Paris based Organization for Economic Co-operation and Development said in a report that Germany is expected to grow 1.5% in the year, marking a slower pace than the 1.9% expansion predicted earlier. In the third quarter, the economy is forecast to record zero growth, before picking up to 0.1% in the fourth quarter.

The outlook for manufacturing industry remains very weak, with Ifo and PMI surveys signaling a further deterioration of activity in August.

The Ifo survey had showed that the business confidence deteriorated more than expected in August, reaching the lowest level in three years, as the economy experiences a more difficult situation. Firms have assessed the current business situation as clearly unfavorable and projected further negative development in the coming six months. Declining for three consecutive months, the business confidence index fell to 94.8 in from July’s 97.5.

According to the survey results of Markit Economics and BME, the manufacturing Purchasing Managers’ Index for Germany dropped to 49.7 in August, which was the lowest level in three years. The flash estimate for August was 49.9. Job creations in Germany were the weakest in two-and-a-half years.

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