German industry output rises more than expected in January

Growth in Europe’s biggest economy set to accelerate further in first quarter of 2017

Steel production in Salzgitter, Germany: Despite recent data that showed industrial orders posting their biggest monthly slump in eight years, Germany’s economic upswing is likely to continue in early 2017. Photograph: Stefan Simonsen/Reuters

German industrial production rose more than expected in January, driven by strong demand for machinery, vehicles and other capital goods, data showed on Wednesday, suggesting Europe’s biggest economy started into 2017 on a solid footing.

The figures, published by the country’s economy ministry on Wednesday, gave some reassurance that Germany’s economic upswing is likely to continue after data on Tuesday showed industrial orders posting their biggest monthly slump in eight years.

“Industrial production is back on track,” Bankhaus Lampe economist Alexander Krueger said, adding that factories would push up overall economic growth in the first quarter of 2017.

Industrial output jumped 2.8 per cent on the month, the data showed. This was the strongest monthly increase since August 2016 and overshot the consensus forecast in a Reuters poll for a rise of 2.5 per cent. The December reading was revised up to a fall of 2.4 per cent from a previously reported drop of 3 per cent. January’s increase was driven by a 3.7 per cent increase in manufacturing output, with demand for machinery, vehicles and other capital goods rising by 6.1 per cent – the strongest monthly increase since August 2013.

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The German economy quadrupled its quarterly growth pace to 0.4 per cent in the final three months of 2016 as higher state and household spending and construction more than offset a drag from net trade with imports rising more than exports.

Economists expect German economic growth to accelerate further in the first quarter of 2017. The government forecasts gross domestic product (GDP) to grow 1.4 per cent this year. This would be below the performance of 2016 when the economy expanded by 1.9 per cent, the strongest rate in half a decade, driven by soaring private consumption, increased state spending on roads and facilities for refugees as well as a higher investment in housing.

– (Reuters)