Rising output heralds early spring for German economy

Workers install parts to passenger cars in Sindelfingen, Germany Spring appears to be arriving early for the German economy as industrial production picked up speed in January, official data showed on Friday. Industrial output expanded by 0.8 percent in January, after inching up by 0.1 percent in December , the economy ministry calculated in preliminary data.
Analysts had been forecasting an increase of 0.7 percent for January.
Economic activity jumped by 4.4 percent in the construction sector, 1.1 percent in the energy sector and 0.3 percent in the manufacturing sector, the ministry said.
Taking December and January combined to iron out short-term fluctuations, industrial output grew by 1.7 percent compared with the preceding two months, the ministry calculated.
Analysts were cheered by the better-than-expected numbers, particularly after factory orders also surprised to the upside in January.
"German 'hard' data confirm what soft indicators like the Ifo index had suggested: Germany's economy kicked off 2014 on a very strong note," said Berenberg Bank economist Christian Schulz.
The expert said the mild winter weather probably played a role, as could be seen in the surge in construction output.
"The rude health of Germany's domestic economy should enable Germany, and by extension the eurozone which benefits from German imports, to weather any potential turbulences emanating from the Ukraine crisis," Schulz said.
Capital Economics economist Jonathan Loynes said the new data "provide some hope that the economy's main growth engine is starting to pick up some revs."
The numbers "provide a solid base for the first quarter," he said, but added: "There are reasons not to get too excited."
The January data were helped by a weather-related boost to construction output "and we still think that the strong euro could temper the recovery even in Germany's competitive industrial sector," Loynes said.
ING DiBa economist Carsten Brzeski said German industrial production "returned as an important growth engine in January. This number gets even better when taking into account that December data was revised upwards from a 0.6 percent drop to a 0.1 percent increase."
Looking ahead, the German economy "should gain further momentum," Brzeski said.
"With the mild winter weather, the construction sector should be an important growth driver in the first quarter. Whether it is by looking through the window or by analysing economic data, this year, springtime seems to come early to Germany." Brzeski concluded.
Source: AFP