German industrial production rose by a slightly stronger than expected 1.2 percent in December, boosted by a rise in construction output and fuelling hopes that a recovery in Europe's largest economy would continue into 2005. The rise, which was also aided by gains in the energy and manufacturing sectors, was the biggest since April 2004 and the second increase in three months, Tuesday's data showed.
"After the manufacturing orders this is another hopeful sign that the economy has not lost momentum and that growth is continuing into 2005," said HSH Nordbank economist Jan-Paul Ritscher. "The summer soft spot is behind us."
However, the Economy Ministry later said the data was likely to be revised down. Economists polled by Reuters ahead of the data had initially forecast a rise of 1.0 percent.
Industrial orders rose 7.1 percent on the month in December, the biggest increase recorded since reunification in 1990.
Although Ritscher said prior to the ministry's revision warning he expected the economy had grown about 0.4 percent in the fourth quarter, most economists were more pessimistic, forecasting growth closer to 0.2 percent or even lower.
Still, Axel Nitschke, chief economist of Germany's chambers of industry and commerce (DIHK), said the output data showed domestic demand had picked up and that there was no reason at present to take "a more downbeat view" on the economic outlook.
Germany's economy expanded by 1.7 percent in 2004, according to preliminary figures, its strongest growth since 2000. This came despite meagre growth of 0.1 percent in the July-September period. The government has forecast 2005 growth of 1.6 percent.
Besides the December orders gain, January also saw the Ifo institute's gauge of business sentiment unexpectedly improve.
HVB Group economist Andreas Rees said the increase in orders would help boost German industrial output as 2005 progressed.
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