German industrial production rose in January for the first time in nine months, though its protracted weakness has probably already dragged Europe’s largest economy into a recession.

The gauge increased 1 per cent from December, led by construction, the statistics office said on Friday (Mar 8), after a bigger-than-previously reported decline the prior month. Within manufacturing, chemicals, food and machine output all rose, but carmakers saw a sharp decline. 

The overall level of production remains close to the lowest level since 2020 at a time when Germany’s manufacturing sector is struggling to shake off a protracted downturn. 

A release on Thursday showed factory orders dropped sharply in January following an uptick in December.

Carsten Brzeski, global head of macro at ING, said that the first hard data for 2024 signals the German economy “is bottoming out.” Still, that won’t be enough to prevent a first-quarter contraction, he said. 

Germany was the only Group of Seven country to see gross domestic product decline in 2023, with its underperformance weighing on the wider 20-nation eurozone. 

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The Bundesbank has warned of a contraction in the first quarter, after a 0.3 per cent fall in the final three months of 2023. That would mean a first recession since the pandemic, though the central bank doesn’t envisage a severe downturn.

Recent days have seen several economists trim their forecasts: On Thursday, Germany’s DIW said it now expects no growth at all in 2024. The government, too, is less optimistic. It has slashed its prediction for this year to just 0.2 per cent – a much flatter rebound than the 1.3 per cent it saw a few months back.

The ruling coalition is stitching together a package of measures totalling about 7 billion euros (S$10.2 billion) to try to lift the economy out of its slump. Last month, an unexpected drop in S&P Global’s purchasing managers’ index for the industrial sector signalled a deepening downturn. BLOOMBERG