Germany has witnessed a significant rebound in industrial output, exceeding expectations for January as production levels recovered from a prior month's decline. According to provisional data released by the Federal Statistical Office this Monday, seasonally and calendar-adjusted industrial production increased by 2% compared to the previous month.
This performance surpassed analysts' predictions of a 1.5% rise, effectively countering a revised 1.5% decline recorded in December 2024. While the production levels on an annual basis still reflect a downturn, showing a decrease of 1.6%, this is an improvement compared to the revised 2.2% fall seen in the previous month. The significant rise in industrial output was primarily fueled by a remarkable 6.4% increase in automotive production month-over-month.
Additionally, the food and machine maintenance and assembly sectors contributed positively, reporting gains of 7.5% and 15.6%, respectively. Despite these positive trends, the overall gains were somewhat tempered by a concerning 7.7% reduction in the production of fabricated metal products. In contrast to the robust recovery in industrial production, the export sector of Germany appears to be struggling.
Exports declined by 2.5% in January, following a revised increase of 2.5% in December. This decline resulted in a seasonally adjusted trade surplus of 16 billion euros, significantly lower than the anticipated 21 billion euros. Economists from ING have acknowledged the recovery within the German industrial sector, yet they have also emphasized that immediate risks remain.
The looming threat of US tariffs on the European Union presents a vital concern as the landscape evolves. "The data today clearly indicates that Germany's industrial slump has reached a turning point. Nonetheless, it remains premature to declare a definitive recovery," wrote ING. "Current manufacturing capacity utilization is at levels comparable only to those encountered during the financial crisis and the initial lockdown periods.
Additionally, order books have contracted once more in January, particularly due to weak foreign demand, while inventory levels have remained uncomfortably high." On a positive note, analysts expressed optimism regarding the impact of recently announced stimulus measures. "Should the stimulus be effectively implemented, it could potentially instill a short-term confidence boost in the market and improve the long-term outlook for the German economy," the analysis concluded..