German industrial production declined in December at the sharpest pace since 2009 with widespread decreases across sectors, posing a serious blow to hopes of recovery.
Production dipped 2.9 percent from November, when it remained flat, data from the Federal Ministry of Economy and Technology revealed Tuesday. Economists had expected production to stagnate. The latest decline was the steepest since January 2009.
Manufacturing output slid 2.7 percent month-on-month in December, deeper than the 0.3 percent decrease seen a month ago. Energy and construction sectors marked declines after seeing expansions in November. Energy output was down 2.2 percent, and construction output fell 6.4 percent.
On a yearly basis, growth in working-day adjusted industrial output slowed notably to 0.9 percent from 4.4 percent in November. The expected rate of expansion for December was 4.3 percent.
Likewise, annual growth in unadjusted industrial production eased to 0.8 percent from 4.4 percent. In the fourth quarter, production was down by 2.2 percent.
Bundesbank sees a near zero percent growth in the first quarter of 2012, after the biggest Eurozone economy came to a standstill in the final three months of 2011.
All available data for the fourth quarter shows that the contraction of the economy was driven by both the industrial sector and private consumption, said ING Bank economist Carsten Brzeski. But looking ahead, the economist said there are several factors pointing towards a quick rebound of the German economy.
Data released on Monday showed a 1.7 percent month-on-month rise in factory orders in December, after November's 4.9 percent fall. The gain reflected a marked rebound in foreign demand.
As the industrial downturn continues and households remain in cautious mode amid a deepening crisis elsewhere in the euro-zone, the German economy is likely to stagnate this year, said Jennifer McKeown, senior European economist at Capital Economics.
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