Clouds over German economy as industrial output, exports fall

Frankfurt: An unexpected drop in German industrial production in December, as well as a decline in exports, cast a shadow over the outlook for Europe's biggest economy, analysts said Tuesday.

According to regular data compiled by the economy ministry, industrial output fell by 1.2 percent in December, disappointing analysts' expectations for a modest increase.

Factory output - a key yardstick for gauging the health of Europe's biggest economy - had already declined fractionally by 0.1 percent in November.

In December, it was weighed down by falling activity in all main sectors, with manufacturing output down by 1.1 percent month-on-month, energy output contracting by 3.0 percent and construction output slipping by just 0.2 percent, the ministry said.

Analysts had been pencilling in growth of 0.5 percent for the final month of last year.

Separately, the federal statistics office Destatis said that both exports and imports declined in December.

In calendar- and seasonally-adjusted terms, exports fell by 1.6 percent to 97.8 billion euros (USD 109 billion) in December and imports also declined by 1.6 percent to 78.4 billion euros.

That caused Germany's trade surplus - the balance between exports and imports and a key gauge of an economy's comparative strength - to contract to 19.4 billion euros, Destatis calculated.

Nevertheless, taking 2015 as a whole, Germany clocked up its highest-ever trade surplus as both exports and imports powered ahead to new annual records.

However, analysts were more concerned about the December data, and suggested that Germany's economic strength could be faltering.

The industrial output data "was the sharpest monthly drop since August 2014," said ING DiBa economist Carsten Brzeski.

While the decline could be partially explained by the timing of the Christmas holidays, taking the fourth quarter of last year, industrial production was down almost one percent, "illustrating the general weakness of Germany's former growth engine," Brzeski said.