Construction and energy output drag on German industrial production in December

Industrial output in the euro area's largest economy fell short of economists' forecasts by a touch, but core manufacturing fared considerably better.

According to the Federal Office of Statistics, total industrial production slipped at a 0.3% month-on-month pace in December (consensus: 0.4%).

However, November's originally reported 0.2% drop was revised up to reveal an increase of 0.3%.

Furthermore, excluding construction and energy, output was up by 1.2% on the month.

Output of capital goods was strongest, jumping by 2.5%, while that of intermediate goods rose by 0.6% and production of consumer goods by 0.5%.

Construction output on the other hand plummeted by 7.3% and that of energy by 0.7%.

In comparison to the same month one year earlier, industrial production was 4.1% lower and remained 6.9% below its level of February 2020, a month before restrictions were imposed to contain the coronavirus pandemic.

"Looking ahead, the upturn in new orders at the end of last year bodes well for core manufacturing for the first quarter, and we also think construction output will snap back at the start of the year," said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.

"But supply-side constraints likely will continue to drive a wedge between strong demand and firms’ ability to meet it. We expect this headwind to fade through 2022, but only slowly."