LEAD: German output posts biggest fall in three years

By Andrew McCathie Feb 7, 2012, 12:20 GMT

Berlin - German industrial production posted its biggest fall in three years in December, as Europe's biggest economy slowed, data released Tuesday showed.

The Ministry of Economics said output dropped by a larger-than-forecast 2.9 per cent in December, after stagnating in November.

The slump represented the biggest drop in output since January 2009 when the financial crisis pushed the world economy into a steep decline.

Analysts had expected the ministry to say production also stagnated in December, following expectations that the country's economy ran out of momentum in the final quarter, as the debt crisis undercut economic growth across Europe.

The German statistics office said last month that it expected data later this month to show the nation's economy shrank by about 0.25 per cent in the fourth quarter.

The December decline caused production to contract by 1.9 per cent in the fourth quarter compared with the three months to the end of September.

Year-on-year, output rose by 0.9 per cent in December but this was down on the 4.5-per-cent annual gain reported in November.

However, a steady stream of key indicators released this month has indicated that the German economy rebounded as it entered the new year.

'Even if today's numbers look bad, for the German economy this should have been as bad as it gets,' said ING Bank economist Carsten Brzeski.

'The stabilization of industrial orders, along with the pickup in economic sentiment indicators, are the first signs that the weak phase has been overcome,' the ministry said.

On Monday, the ministry said German factory orders jumped more than expected in December, boosted by a 12.3-per-cent surge in demand from nations outside the debt-hit 17-member eurozone.

Industrial orders rose by 1.7 per cent in December, from November when they contracted by 4.9 per cent. This beat analysts' forecasts for a 1-per-cent gain in December.

Still, quarter-on-quarter factory orders tumbled by 1.4 per cent during the three months to the end of December, the ministry said.

Leading the fall in the monthly output data for December was a 2.7-per-cent drop in manufacturing production and a 6.8-per-cent contraction in the building sector.