German industrial production rises as recovery gathers momentum

[FRANKFURT] German industrial production rose for a fourth month in December, adding to signs that an expansion in Europe's largest economy is gathering pace.

Output, adjusted for seasonal swings, was up 0.1 per cent after a revised 0.1 per cent gain in November, a report from the Economy Ministry in Berlin showed on Friday. The increase in the typically volatile figures compares with a median estimate of a 0.4 per cent gain in a Bloomberg News survey. Production fell 0.7 per cent from a year earlier.

The Bundesbank predicts that the economy has overcome its weak phase of early last year, as indicated by a 4.2 per cent jump in factory orders in December and a third consecutive improvement in business confidence in January. The European Central Bank's quantitative-easing pledge last month will further bolster the economy through a weaker euro exchange rate that's making exporters more competitive.

"It is really difficult to see why the German economy should not accelerate further already in the first quarter of 2015 and beyond," said Andreas Rees, an economist at UniCredit SpA in Munich. "The combination of already better hard data and signs of more to come as conveyed by leading indicators is a pleasant one, to say the least." Manufacturing output rose 0.5 per cent in December from the previous month, driven by a 2 per cent increase in basic-goods production, according to the report. Output of investment goods fell 1.2 per cent in December, and construction declined 2.9 per cent.

Order intake in the fourth quarter and an improvement of business confidence "are an indicator that manufacturing will continue to develop positively also in the coming months," the Economy ministry said in the statement.

The European Commission raised its forecasts for German growth this year to 1.5 per cent from 1.1 per cent, and to 2 per cent in 2016 from 1.8 per cent.

"Germany's economic growth is expected to strengthen gradually," the European Union's executive arm said on Wednesday. A robust labor market and low interest rates will underpin domestic spending as external demand improves, it said.

BLOOMBERG