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German industrial output data disappoint

German industrial production shrinks in December, hit by falling activity in the manufacturing and energy sectors; analysts insist overall uptrend remains intact.

FRANKFURT: German industrial production shrank in December, hit by falling activity in the manufacturing and energy sectors, data showed on Friday, but analysts insisted the overall uptrend remains intact.

According to regular data compiled by the economy ministry, industrial output fell by 0.6 per cent in December, after rising by 2.4 per cent in November.

Manufacturing output slipped by 0.5 per cent and energy output was down by 2.6 per cent, while construction output edged up 0.5 per cent.

Taking November and December combined to iron out short-term fluctuations, industrial output grew by 1.5 per cent compared with the preceding two months, the ministry calculated.

Following a surprise drop in factory orders in December, the output data disappointed analysts who had been pencilling in a modest gain at the end of last year.

But the drop is not sufficient to derail altogether the tentative recovery in Europe's economy, analysts said.

"This doesn't change the stable uptrend of industry, not least because the November figure has also been revised upwards," said Commerzbank economist Ralph Solveen.

"That said, at probably 0.2 per cent, growth of the whole economy in the fourth quarter is looking fairly weak," he added.

ING DiBa economist Carsten Brzeski also saw the data as "another setback" for Germany, after disappointing export data in December.

"The dichotomy between soft and hard data has been a striking conundrum of the German economy in recent weeks," Brzeski said, pointing out that most confidence indicators stand close to all-time-highs and the optimism is strong, while at the same time hard economic data has rather disappointed.

"With today's numbers, the last faint hope that fourth quarter growth could still surprise to the upside has disappeared," the expert said.

"It looks as if the meagre growth rate of 0.1-0.2 per cent suggested by the German statistical office's first estimate in mid-January, was right. The only upside from this disappointing year-end is that it will make the upcoming growth acceleration more enjoyable," he concluded.

Capital Economics economist Jonathan Loynes said the output data "are a bit of a blow to hopes that the eurozone's main growth engine is picking up speed."

"The better news is that the survey indicators continue to paint a rather brighter picture of the outlook for industry, and for the German economy as a whole," Loynes said.

"For now though, the hard activity data across the eurozone retains a distinctly weak tone, further raising the pressure on the ECB to provide more policy support next month," Loynes said.

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