German production stalls in June

Germany relies on overseas demand for its goods to boost growth

Production at German factories rose by less than expected in June, adding to fears that the economy is on the brink of sliding into a recession.

Official data showed industrial output rose by a lacklustre 0.2% in the month.

On a brighter note, separate figures showed export growth grew at 4.2% in June, its fastest rate for two years, while imports fell 0.1%.

The trade surplus in June rose to a seasonally-adjusted 18.1bn euros ($28.0bn; £14.3bn).

But the figures failed to encourage analysts, who believe that the export picture will weaken.

"The moaning about a possible recession will increase in the coming weeks," said Carsten Brzeski, an economist at ING.

Export worries?

The Economy Ministry figures come on the day policy makers at the European Central Bank kept eurozone interest rates unchanged at 4.25% as they battle to control accelerating consumer inflation.

Quarterly growth figures are expected next week, which are expected to show a sharp slowdown in German growth between April and June and perhaps even a contraction.

Strong overseas demand for German goods has helped to power the country's economic growth for a number of years.

But now analysts fear that the strength of the euro - which makes German goods more expensive abroad - and a global economic slowdown could reduce this demand.

Earlier in the week, government figures showed a shock fall in industrial orders.

Factory orders fell 2.9% in June from the previous month - much more than the 0.4% decline that many analysts had been expecting.

Overseas orders dropped 5.1%, with the biggest fall in orders from countries within the 15-nation euro bloc, down 7.7%.

Domestic demand appears unlikely to plug the gap. According to market research firm GfK, consumer confidence is at its lowest level in five years.