FRANKFURT, Dec 8: German industrial output slumped again in October, falling a much worse-than-expected 2.1 per cent from September, economy ministry figures showed on Monday.

Analysts had expected a drop of 1.5 per cent, after production contracted by 3.3 per cent in September on a monthly basis.

On a 12-month basis, output plunged in October by 3.8 per cent, the worst result since February 2002, Capital Economics economist Jennifer McKeown noted.

The ministry warned in a statement that it was likely that “production (will) continue to fall in the coming months,” owing in particular to weak industrial orders, which tumbled 6.1 per cent in October.

A breakdown of the preliminary data showed construction activity contracted 3.0 per cent and industrial activity 2.2 per cent.

On a two-month basis, output in the biggest European economy was down 2.8 compared with July and August.

Germany, which is also the world’s leading exporter, has hit a wall owing to falling global demand for industrial goods such as machine tools, and autos, two of its main strengths.

“The earlier driver of the recovery is now acting as a heavy drag on the economy,” McKeown said.

Traditionally thrifty German consumers gave German output a small boost in the third quarter but did not make up for losses in exports and investment.

Business sentiment surveys indicate that the worst could well lie ahead.

The widely-watched Ifo survey found that business confidence had fallen in November to its lowest level in more than 15 years, suggesting that Germany could be in for a long recession.

Data has also indicated that after contracting in the second and third quarters, thereby meeting the technical definition of recession, the German economy was set to shrink further in the fourth quarter of 2008.

“If the surveys are right about the severity of the industrial recession, the German economy will contract more sharply than the latest consensus forecast for a 0.4 per cent decline next year,” Mckeown said.

Meanwhile, Der Spiegel magazine reported on Monday that executives from eight major German companies, including Volkswagen, Adidas and BASF feel the government has not done enough to combat the international financial crisis.

“We must first of all prevent the crisis from becoming a devastating fire,” Volkswagen boss Martin Winterkorn was quoted as saying.

“We are facing a situation that is absolutely extraordinary -- and we cannot emerge from it with the traditional political and economic approaches.” Rival automakers BMW and Daimler have reported that sales fell sharply in the past two months, and are cutting back on their temporary workforce and extending the traditional end of year pause to compensate for weaker demand.

—AFP