Industrial output in Germany dropped by 2.9 percent in December, according to data released by the Economics Ministry on Tuesday.

The slowdown came after stagnating production had been reported already in November.

Economic activity, the ministry said, was down across all industrial sectors. Manufacturing output was down by 2.7 percent, while energy production decreased by 2.2 percent and construction output dropped a staggering 6.4 percent.

December's figures rounded off a fourth quarter in which overall industrial output shrank by 1.9 percent, compared with the previous quarter.

The latest numbers are below market expectations for output to remain steady, suggesting the country's economic slowdown could be worse than expected. "They confirm the slowdown of the German economy," Carsten Brzeski, senior economist at ING Belgium, told the AFP news agency.

"However, it's neither a crash landing, nor a belly flop, but only a breather," he added.

Mixed signs

In recent weeks, consumer and business confidence in Germany has actually risen, and December industrial orders reported Monday were up substantially. That had led to suggestions that the economic slowdown would not be as bad as feared.

Brzeski said the negative numbers should be "as bad as it gets" for the German economy.

"The stabilization of industrial orders, along with the pick-up in economic sentiment indicators, are the first signs that the weak phase has been overcome," he said.

However, Jennifer McKeown at Capital Economics in London is more skeptical. She told the Associated Press that the drop in industrial output was "a serious blow to hopes that the economy is showing signs of recovery."

"As the industrial downturn continues amid a deepening crisis in the eurozone, we see the German economy stagnating this year," she added.

Fears of a recession in debt-stricken eurozone countries is weighing heavily on Germany, and have already forced the government to reverse its 2012 growth forecast from 1 percent to 0.7 percent. The outlook for industrial output "remains subdued for now," according to the Economics Ministry.

Author: Uwe Hessler (AFP, dpa, AP)
Editor: Martin Kuebler