Modest rise in German July industry output points to slow recovery

BERLIN (Reuters) - German industrial output rose far less than expected in July, suggesting Europe's largest economy faces a slow return to production levels that preceded the crisis unleashed by the coronavirus pandemic, data showed on Monday.

Industrial output rose by 1.2% on the month, a third successive increase after record drops in March and April, figures released by the Statistics Office showed. A Reuters poll had forecast an increase of 4.7%.

A breakdown of the data showed that activity in the construction sector, which had expanded during the lockdown, shrank by 4.3%, dragging on the headline figure.

The automotive sector, which had faced headwinds before the crisis linked to falling demand and an expensive shift to electric vehicles, saw activity expand by almost 7% month-on-month but production levels were still around 15% lower than in February.

"The German economy remains on track for a strong surge in the third quarter," said Carsten Brzeski, chief euro zone economist at ING. "It is too early to tell how much momentum will be left thereafter."

(Reporting by Joseph Nasr; Editing by Michelle Adair)