Berlin: German industrial production fell sharply in December, putting Europe’s largest economy on a weakened footing going into 2010 and dealing a fresh setback to recovery hopes. The economy ministry said industrial output fell 2.6% on the month in seasonally adjusted terms, below the consensus forecast in a Reuters poll of 40 economists for a rise of 0.5% and weaker than even the lowest projection.
“This is a very disappointing figure. Almost every sector fell,” said Citigroup economist Juergen Michels. “However, the Christmas holidays and the harsh winter could have distorted the numbers. Therefore it is not a sign that the recovery is over.”
Economy minister Rainer Bruederle has said growth in the first quarter of 2010 could be near zero. Heavy snowfall and freezing temperatures have cast a shadow over economic prospects early this year, especially for the construction sector.
A breakdown of the production data showed manufacturing production fell by 2.8% on the month while construction output declined by 2.6%.
The data followed news on Thursday that German manufacturing orders for December fell 2.3% on the month, hit by a drop in foreign demand for goods from Europe’s largest economy.
“In view of the weaker incoming orders, diminished drive from production is to be expected for the foreseeable future,” the ministry said in a statement. “According to the latest surveys, companies nonetheless remain predominantly confident.”
German business sentiment rose more than expected in January to its highest level in 1-1/2 years, suggesting recovery will gather pace once the economy emerges from a harsh winter.
Leading German companies are cautiously optimistic.
Germany’s biggest steelmaker, ThyssenKrupp, said last week it was on track to hit its earnings targets after most of its businesses posted fiscal first-quarter profits.
Europe’s biggest engineering group Siemens posted surprise profit growth in the first quarter helped by cost-cutting, and has said it would review its 2010 outlook after the strong start to the year.