By William L. Watts, MarketWatch
LONDON (MarketWatch) -- Germany's industrial production posted a smaller-than-expected rise, while exports fell in July, reinforcing expectations that Europe's largest economy will see slower demand for its goods as the global economy runs into headwinds.
Germany's Economics Ministry in Berlin said industrial production rose 0.1% from June. Economists had forecast a 1% rise. Manufacturing orders fell 2.2% in July.
The overall level of German industrial production started the third quarter at a pace exceeding the second quarter by 0.6%, said Julian Callow, chief European economist at Barclays Capital.
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Barclays expects industrial production to grow 0.8% in the third quarter. That said, the pace of overall gross domestic product growth is expected to be "relatively moderate" after the 2.2% rise seen in the second quarter, Callow said.
The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.2718, +0.0034, +0.2681%) was up 0.2% versus the dollar at $1.2707 in recent action.
Earlier, Germany's Federal Statistical Office said exports dropped 1.5% in July from June, while imports saw a 2.2% decline. The seasonally-adjusted trade deficit widened to 12.7 billion euros ($16.2 billion) from €12.4 billion in June.
"Looking ahead, German exports will have to deal with two downward risks: slower global demand and fiscal consolidation in other euro-zone countries," said Carsten Brzeski, an economist at ING Bank, in a note to clients.
But Brzeski said those risks likely won't choke off the nation's export recovery.
ING expects demand from emerging Asia, particularly China, to remain stable. Also, demand from other industrialized counties won't completely fade away.
German manufacturers may also benefit from the latest round of U.S. infrastructure spending, Brzeski said.
German gross domestic product expanded by 2.2% in the second quarter, the fastest quarterly pace of growth since reunification in 1990. Growth was fueled by strong exports amid strong demand from emerging economies.
William L. Watts is a reporter for MarketWatch in London.
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