German industrial production pushes higher

German industrial production ticked higher in January, official data showed on Friday, beating expectations.

According to Destatis, the Federal Statistics Office, production in industry rose 1% following a revised 2% decline in December. Analysts had been expecting a smaller uptick, of around 0.5%.

Year-on-year, industrial production fell 5.5%.

Leading the increase was construction, which saw production rise 2.7% after falling 3.1% in December.

Other strong contributions came from the food industry, up 5.9%, and machine maintenance and assembly, which jumped 11.1%.

The car industry, in contrast, recorded a 7.6% decline.

Destatis also released data on producer prices of industrial products on Friday. That showed a 4.4% decline on December and a 0.2% uptick on January 2023.

The month-on-month fall was less than expected, with most analysts forecasting a 6.6% decline. It was the first result following Destatis rebasing the index, to a new base year of 2021.

It also marked the seventh consecutive month of producer deflation. However, the fall was the lowest since July.

Driving the decline were energy prices, down 11.7% year-on-year or 0.1% month-on-month as natural gas prices softened. Once energy prices were stripped out, producer prices rose 0.3% on December and fell 0.5% on January 2023.

Friday’s releases follow a raft of official data from Germany in recent days, which showed a slump in factory orders and a fall in retail sales but a surprise surge in exports.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: "Overall these are encouraging numbers at the start of 2024, but we’re disinclined to see them as the beginning of a turning point, at least not until we see more evidence.

"These surveys remain poor and while the first quarter carry is now 0.3%, pointing to a better outcome than the 1.7% decline in the fourth quarter, we think the outlook for the first quarter will look worse on the February numbers."

Carsten Brzeski, global head of macro at ING, said: "Highly volatile data at the turn of the year make it harder to derive a clear trend. What we take from the first batch of hard data for the Germany economy in 2024 is the picture of an economy that is bottoming out but still stuck between cyclical and structural weakness.

"Currently an imminent rebound still looks unlikely, even if there is some vague light at the end of what increasingly looks like a very long tunnel."

Europe’s largest economy, which is heavily reliant on manufacturing, has been hit hard by surging energy prices, record inflation, higher interest rates and weak global demand.