German Industrial Output Slips as Economy Wraps Bumper Year

Bolstered by strong domestic demand and surging trade worldwide, manufacturing has been driving Germany’s economic boom — and the upturn is set to continue in coming months after orders rose 3.8% in December.

German industrial production slipped in December after strong momentum throughout the year helped Europe’s largest economy expand at the fastest pace since 2011.

Factory output declined 0.6% from November, when it increased a revised 3.1%, the Economy Ministry said on Wednesday. The reading, which is typically volatile, compares with estimates for a 0.7% drop in a Bloomberg survey.

Bolstered by strong domestic demand and surging trade worldwide, manufacturing has been driving Germany’s economic boom. The upturn is set to continue in coming months after orders rose 3.8% in December, while a wage agreement between employers and the country’s largest union — representing some 3.9 million metalworkers and engineers — removes the risk of strikes and provides clarity on labor costs.

On Tuesday, IG Metall won a 4.3% pay increase over 27 months in a key state, plus additional one-time payments, and options to temporarily reduce working hours.

The Bundesbank says the German economy will maintain its drive. After growing 2.2% last year, gross domestic product is forecast to increase 2.5% in 2018. A gauge of manufacturing activity remained close to a record high at the start of the year.

“Industrial output was very dynamic in the course of 2017 but has lost some momentum lately,” the ministry said in a statement. “Nonetheless, production is clearly pointing upward, and in light of strong orders in December and good sentiment indicators, strong manufacturing momentum can be expected in the coming months.”