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German industrial output rises, construction strong

BERLIN: German industrial output rose by a seasonally adjusted 0.7 percent in December, falling short of market expectations despite being buoyed by strong construction activity, data showed on Wednesday.

Analysts surveyed by Reuters had on average expected a rise of 1.3 percent, although rumours circulating on foreign exchange markets shortly before the data's official release had been in line with the actual figure.

The euro dipped briefly against the U.S. dollar after the release of the data, but quickly recovered to trade above $0.99, within a quarter of a cent of a six-day high of $0.9945/50.

Traders said reaction was muted after the German industrial data again appeared to leak out into financial markets before their official release.

Economists said that although the headline figure was short of expectations it did not undermine the view that growth was continuing to recover in Europe's largest economy.

"The data confirm that the economic upturn is continuing," said Uwe Angenendt, chief economist at BHF-Bank in Frankfurt.

"We had expected a slightly higher number of one percent, but in principle this rise is in line with what could be expected and confirms the trend we have expected in the output numbers on the basis of good incoming orders data."

The Finance Ministry said in a statement that overall industrial output in December had been helped by a 3.0 percent rise in construction output thanks to mild weather, while manufacturing was up by just 0.2 percent.

December's 0.7 percent month-on-month rise followed a dip of 0.2 percent in November, the provisional figures showed.

Based on Bundesbank historical data, production was up by 2.9 percent in December against a year earlier, compared with a 2.3 percent increase in November.

Frank Schroeder, economist at HSBC Trinkaus in Duesseldorf, said the output rise was in line with his expectations and pointed to a rise of 1.2 percent in German gross domestic product in the fourth quarter of last year.

Schroeder said he expected the pace of industrial growth to pick up sharply in the coming months.

"Current leading indicators such as the Ifo (business climate) index suggest that we could get year-on-year growth rates of between five and six percent in industrial output," he said.

Ralph Solveen, at Commerzbank in Frankfurt, expressing a minority view, said he was surprised and pleased by the December figure and it heralded strong activity in the early months of 2000.

"Everything - incoming orders and economic activity - indicates that we will see a significant rise in industrial production in the first quarter," Solveen said.

Deutsche Bank's Hans-Juergen Meltzer was, however, disappointed with the output figure, saying it did not mesh with strong surveys of business confidence.

He predicted that there would be an upward revision in the output figure and said Germany was on course to post growth in industrial production of four percent this year.-Reuters