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German Industrial Output Falls more than Expected in Dec

Feb 7 (Reuters) - German industrial production fell more than expected in December, the federal statistics office said on Wednesday, marking the seventh monthly decline in a row and highlighting weakness in the backbone of Europe's largest economy.

Industrial production fell in December by 1.6% compared with the previous month. Analysts polled by Reuters had predicted a 0.4% fall.

The seventh consecutive monthly fall in German industrial output in December confirms that industry remains a significant drag on growth, Capital Economics' senior Europe economist Franziska Palmas said.

"High energy costs and weak domestic and external demand will cause German industrial output to decline further in 2024," Palmas said.

In energy-intensive industries, production fell by 5.8% in December on the month, the office said.

There were particularly strong declines in the important chemical industry, with production falling by 7.6% on the month, and in construction, with a 3.4% decline. Production also fell in many other sectors, albeit less sharply, the statistics office said.

However, the 4.0% increase in production in the automotive industry had a positive effect on the overall result.

"The sharp drop in both exports and imports, as well as today's industrial production, not only illustrates the weakness of the German economy's backbone but also increases the risk of a downward revision of fourth-quarter GDP growth," said Carsten Brzeski, global head of macro at ING.

Gross domestic product contracted by 0.3% in the fourth quarter compared to the previous quarter, prompting economists to warn of another recession.

In the last quarter of the year, a less volatile figure, industrial production fell 1.8% compared to the three months before.

In November, production fell by 0.2% compared to October, after the preliminary results were revised up from a 0.7% drop.

In 2023 as a whole, production was 1.5% lower than in 2022 after calendar adjustment.

German industrial orders unexpectedly jumped by 8.9% in December, posting their highest month-on-month increase in more than three years, driven by "an exceptionally" high number of aircraft orders, the federal statistics office said on Tuesday.

The lack of orders in manufacturing is increasingly becoming a burden on the German economy, the Ifo Institute said on Monday, and economists warned that Tuesday's data did not change that.

Reporting by Maria Martinez in Berlin and Tristan Veyet in Gdansk; Editing by Miranda Murray, Michael Perry and Sharon Singleton

Source: Reuters

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