German Industrial Output Unexpectedly Fell in December: Economy

German industrial output unexpectedly fell in December, signaling that Europe’s largest economy remains vulnerable to weakness in the rest of the region.

Production, adjusted for seasonal swings, decreased 0.6 percent from November, when it rose a revised 2.4 percent, the Economy Ministry in Berlin said today. Economists predicted a gain of 0.3 percent, according to the median of 40 estimates in a Bloomberg News survey. Production rose 2.6 percent from a year earlier when adjusted for working days.

While the Bundesbank predicts Germany’s economy will expand “strongly” in the first months of 2014, turmoil in emerging markets and a fragile recovery in rest of the 18-nation euro area, the country’s largest trading partner, could weigh on output. German factory orders unexpectedly declined in December, even though business confidence is at a 2 1/2 year high.

“These data are very volatile,” said David Mackie, chief European economist at JPMorgan Chase & Co. in London. “ We continue to expect firmer capital spending this year.”

Manufacturing output declined 0.5 percent in December from the previous month and investment-goods production fell 2.5 percent, according to today’s report. Output of basic and consumer goods and construction all rose.

Domestic Demand

The Economy Ministry said perspectives for industrial production in 2014 remain positive amid “lively” order intake and an improvement in business confidence.

In the U.K., factories boosted output by less than forecast in December, suggesting manufacturing is set for steady rather than runaway growth this year. Production rose 0.3 percent from November, the Office for National Statistics said today in London. The median estimate was for a 0.6 percent increase.

Industrial production in Spain rose a seasonally-adjusted 1.7 percent in December from a year earlier, after growing 2.4 the previous month. Output stagnated at the end of the year in Italy and France, according to separate surveys. Data are due to be published on Feb. 10.

Germany has relied mostly on internal demand to sustain growth, with consumer confidence at near-record levels and declining unemployment hinting at a pickup in consumption. Manufacturing in the country expanded for a seventh month in January, according to a survey of purchasing managers.

Factory Orders

Osram Licht AG, the world’s second-biggest lighting company, said on Jan. 28 that it forecasts a sharp rise in income and sales this fiscal year. At the same time, Heidelberger Druckmaschinen AG, the world’s largest printing-press maker, said on Feb. 5 that its sales volume will drop because of slow investment.

Factory orders declined 0.5 percent in December on weaker domestic demand, after a jump of 2.4 percent the month before, and investor confidence unexpectedly dropped in January from a seven-year high.

Germany’s gross domestic product probably increased about a quarter of a percent in the three months through December, compared with 0.3 percent in the third quarter, the Federal Statistics Office said last month. Economists predict quarterly growth was 0.4 percent at the end of last year and will accelerate to 0.5 percent at the beginning of 2014.

The European Central Bank’s Governing Council left its interest rate unchanged at a record-low 0.25 percent yesterday. President Mario Draghi said policy makers may act as soon as next month to counter low inflation, when more data on the euro area’s economy will be available.

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