German industrial production drops 2.6 percent on month in December

German industrial production down in December

BERLIN — Industrial production in Germany, Europe’s biggest economy, was down 2.6 percent on the month in December, government data showed Friday — a drop propelled in part by weaker car production.

The performance compared with a modest rise of 0.7 percent in November and was much worse than the 0.6 percent increase that economists had forecast.

While production of consumer goods rose by 1.5 percent, there were big drops in other sectors, such as so-called investment goods such as machinery. The Economy Ministry said those stemmed largely from weaker production of chemical products and motor vehicles.

Car sales in Germany were boosted for much of last year by a government car-scrapping bonus program, but that expired in September.

Output in the construction sector also was down, declining by 2.6 percent.

The Economy Ministry acknowledged that industrial production lost the momentum of the previous two quarters at the end of last year, but said the quarter-on-quarter trend remained positive in the October-December period, rising 0.3 percent.

The impact of lower car production was “likely exacerbated by temporary plant closures during the Christmas holidays,” said Alexander Koch, an economist at UniCredit in Munich.

“The temporary boost from the car-scrapping premium helped to stabilize domestic sales earlier in 2009 and now weighs on the overall industrial dynamic,” he added.

The government has forecast that Germany’s economy will grow by a steady but unspectacular 1.4 percent this year as the export markets that traditionally have fueled its performance pick up.

While domestic demand looks subdued and a long cold snap could weigh on construction in the first quarter, “the outlook for ongoing solid fresh supply of foreign demand still remains intact,” Koch said.

On Thursday, the Economy Ministry said that German industrial orders were down 2.3 percent on the month in December, reversing a large gain the previous month.