German industrial production rises in sign of stabilisation

German industrial production rose at the start of the year, another signal that the extended downturn in the sector may be easing. 

Output rose 2 per cent from the previous month in January — more than the 1.5 per cent advance predicted in a Bloomberg survey of economists. That was mainly driven by cars, the statistics office said.

The numbers contrast with a report last week showing factory orders slumped in the same month, driven by large-scale items.

But there have also been positive signs lately: Purchasing managers polled by S&P Global indicated last month that the industrial recession that began in 2022 was abating. 

The outlook for German factories has shifted abruptly of late as Chancellor-in-waiting Friedrich Merz looks to beef up the military to counter Russia and invest €500 billion ($543 billion) in infrastructure. 

While hurdles remain, analysts largely except a positive impact on growth. Bloomberg Economics estimates that a rapid ramp-up in infrastructure expenditure could lift gross domestic product by 1 per cent in the near term and by 2% in the long run. 

“In the medium to long term, the general situation seems to be turning positive,” said Michael Herzum, head of macro and strategy at Union Investment, adding that even “in the short term, we are feeling a touch of spring.”

There’s still the threat of US trade tariffs, though, to which Germany’s manufacturing sector is particularly exposed. President Donald Trump has warned that 25% levies on European imports are in the making. But his rapid reversals on neighbors Canada and Mexico make his plans difficult to predict. 

Separate data showed that the country’s trade surplus narrowed last month.