German industrial production takes surprise tumble

Industrial production in Germany unexpectedly fell back sharply in July amid sluggish global demand, official data showed Wednesday, fuelling concern of a "further cooling" of the economy.

July saw production 1.5 percent lower than the previous month in Europe's largest economy, correcting for price, calendar and seasonal effects, the federal statistics office Destatis said.

The figure fell far short of the 0.1-percent expansion that analysts surveyed by Factset had predicted.

Compared with the same month in 2015, production was 1.2 percent lower after correcting for calendar effects.

While energy and construction both reported increases in production, growing by 2.6 and 1.8 percent, industrial firms' output contracted by 2.3 percent.

"Industrial firms are taking a wait-and-see approach given the sluggish development of global markets," the economy ministry said in a statement.

Looking in detail at industrial companies, production of producer goods shrank by 0.8 percent, while capital goods lost 3.6 percent and consumer goods 2.6 percent.

"The sharp drop will feed worries about a further cooling of the German economy," said analyst Carsten Brzeski at ING Diba bank.

He pointed to a trend "already started long before the British referendum (in June), but clearly the Brexit vote should have been one of the main drivers."

"Today's industrial production data provide further evidence that the German economy is increasingly becoming dependent on domestic demand," he went on, noting the impact of weaker activity in China and ongoing struggles in the eurozone on German exports. 

Data on industrial orders in July published on Tuesday showed only a slight increase of 0.2 percent, slightly lower than Factset analysts had predicted.