9 October 2002, 08:55  German August Industrial Production Probably Fell, Analysts Say

/www.bloomberg.com/ By Sonja Dieckhoefer
Frankfurt, Oct. 9 (Bloomberg) -- German industrial production probably fell for a fifth month in six in August, the latest sign Europe's largest economy is stagnating.
Production probably fell 0.3 percent in August from the previous month, according to the median forecast of economists surveyed by Bloomberg News. In July, output declined 0.9 percent.
Germany's small and medium- sized companies are more pessimistic than they've been for six years, the Creditreform credit rating service said yesterday. Companies have pared back earnings forecasts as stocks tumble and the price of oil rises. The DAX stocks index is down 50.2 percent this year.
``In Germany, we're almost in a recession,'' said Ulrich Berz, who advises investors managing as much as 63 billion euros ($61.6 billion) at Union Investment Privatfonds GmbH.
Berz said the German economy may have contracted in the third quarter. It grew 0.3 percent in the second quarter, the same pace as in the first three months. The Finance Ministry will release the production report from 11 a.m. Berlin time.
Infineon Technologies AG, Europe's second-biggest maker of semiconductors, sees only ``very small signs'' of recovery in the next two quarters, Chief Executive Officer Ulrich Schumacher said yesterday.
Pfeiffer Vacuum Technology AG on Monday said sales at the German maker of pumps used to make semi-conductors and television tubes will slide 5 percent this year as demand in the U.S. and Europe fails to recover. The company supplies Bayerische Motorenwerke AG and General Motor Corp.'s Adam Opel AG.
Iraq Concern
Concern a possible war with Iraq could boost oil prices and erode consumer spending has caused stocks worldwide to plunge. The Dow Jones Industrial Average has fallen 26 percent this year. The DAX was the second-worst performing index in the world last quarter. Oil prices have gained 43 percent this year.
German machinery orders dropped 3 percent in August on weaker demand from companies at home. The trade balance likely narrowed in August, economists predict. Europe's services industry contracted in September.
A recovery may be delayed until next year. Germany's DIHK industry group on Oct. 1 said it sees exports rising 3.7 percent in 2003 after growth of 1.5 percent in 2002. Global car-parts suppliers' sales will rise 75 percent in the next eight years, helping to create jobs, the VDA carmakers' group said yesterday.
Rising Orders
Factory orders rose for the first month in three in August, the Finance Ministry said on Monday. Unemployment fell by 1,000 in September, a report yesterday showed.
ThyssenKrupp AG, Germany's biggest steelmaker, said it expects to sell more steel and for profit to rise in the business this fiscal year as the industry recovers from the worst prices in two decades.
The Germany economy probably won't get help from the European Central Bank soon. ECB President Wim Duisenberg signaled the bank will keep rates unchanged when its 18-member governing council meets to discuss borrowing costs tomorrow.
``The main problem which plagues both the European economy and the American economy also is not the level of interest rates,'' Duisenberg told the European Parliament's economic and monetary committee. ``It's the lack of confidence and a great deal of uncertainty prevailing in all these economies.''
The bank has said risks to inflation in the region are ``balanced.'' The inflation rate rose to 2.2 percent last month from 2.1 percent in August, above the ECB's 2 percent limit. Duisenberg added the ECB is keeping its ``powder dry'' on rates.
Analysts surveyed by Bloomberg News said the ECB will leave rates unchanged on Thursday. Still, more than half of those surveyed expect the central bank to pare borrowing costs by at least a quarter point from the current 3.25 percent before the end of the year.
Interest-rate futures contracts show investors expect the ECB to pare rates before the end of the year. The yield of the three- month Euribor for December was at 2.96 percent at 17:47 p.m. Frankfurt time, 29 basis points below the benchmark rate. The March yield is at 2.80 percent.

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