Following an unexpected drop in factory orders, news that German industrial output stagnated in January dealt another blow to hopes for a strong recovery in Europe's biggest economy, analysts said Friday. A day after data revealed that shrinking exports led to a 1.9-percent contraction in incoming orders for German industry in January, the economy ministry calculated that industrial output did not grow at all that month due to falling activity in the manufacturing and energy sectors.
Output had expanded by a solid 0.6 percent month-on-month in December and analysts had been pencilling in a further modest increase of around 0.4 percent for January in what is also the world's fourth biggest economy. A breakdown of the data showed that while construction output grew by 3.0 percent, manufacturing output edged down by 0.2 percent and energy output declined by as much as 2.3 percent.
Taking the two months combined, to iron out short-term fluctuations, overall output edged 0.3 percent higher, driven primarily by rising manufacturing output, the ministry calculated. Analysts said the two sets of disappointing industrial data could dent hopes that Germany has finally put the worst of the debt crisis behind after gross domestic product (GDP) contracted by 0.6 percent in the final quarter of 2012.
"The German industry has stabilised after the decline since late-summer. However, it is still not a sharp and healthy rebound," said ING Belgium economist Carsten Brzeski. The factory orders data "illustrated that the way out of the contraction will not follow a straight line. The negative side-effects from the crisis in most neighbouring countries have become a speed limit to any industrial recovery," the expert said.