German economy cooling as exports drop

Data from the German Economy Ministry showed industrial output in Europe's largest economy fell by 1 percent in April.

A separate report from the Federal Statistics Office (Destatis) said German exports dropped by 0.3 percent in April.

Friday's news came just a day after companies signaled an unexpected 2.5-percent fall in industrial orders.

Trend reversal?

"The German economy will only make timid headway in the second quarter," VP Bank Chief Economist Thomas Gitzel wrote in a note to clients. "Weak orders, weak exports and disappointing production are a bitter setback."

The three indicators had fallen in three of the first four months of the year. Most analysts had linked the weak performance to more public holidays, cold weather and flu epidemics. But economists are starting to consider more deep-seated factors.

Sophia Krietenbrink, an analyst with Germany's DIHK Chambers of Industry and Commerce, said concerns about protectionist trade policies were creating uncertainty for many companies.

"It seems as if supply-side constraints are increasingly hampering growth prospects," added ING Diba's Carsten Brzeski, pointing to both equipment and labor being at their highest levels in decades and limiting production.

hg/jd (Reuters, AFP, dpa)