By Maria Martinez

BERLIN (Reuters) – German exports rose in December while industrial output fell more than expected, suggesting the outlook for the euro zone’s largest economy remains anything but rosy.

Exports increased 2.9% compared to the previous month, according to data from the federal statistics office released on Friday. Economists in a Reuters poll had forecast a 0.6% decrease.

For all of 2024, exports contracted 1.0% compared to 2023 due to weak demand from China, following another contraction in 2023.

Imports saw a decline of 2.8%, and the foreign trade balance showed a surplus of 241.2 billion euros in 2024.

Increased competition from abroad, high energy costs, persistently high interest rates, and an uncertain economic outlook have negatively impacted Germany’s economy, which contracted for the second consecutive year in 2024.

The government forecasts a 0.3% decline in exports this year, marking the third straight year of decline due to diminishing competitiveness and escalating geopolitical and trade tensions.

The BDI industry association cautioned that Donald Trump’s potential return to the White House and his tariff threats could lead to a shrinkage of almost 0.5% in Germany’s export-oriented economy by 2025.

In December, exports to other EU countries rose 5.9% on the month, while exports to countries outside the EU fell 0.5%. Imports rose 2.1% on a calendar and seasonally adjusted basis compared with November.

The foreign trade balance recorded a surplus of 20.7 billion euros ($21.5 billion) in December, up from 19.2 billion euros in November 2024.

INDUSTRY IN POOR HEALTH

Meanwhile, German industrial production fell more than expected in December, decreasing by 2.4% compared to the previous month, as reported by the federal statistics office on Friday.

Analysts polled by Reuters had predicted a 0.6% decline. Revised data indicated that production grew 1.3% in November 2024 compared to October, slightly less than the previously reported 1.5%.

Industrial production remains approximately 10% below its pre-pandemic levels, stated Carsten Brzeski, global head of macro at ING. “Today’s industrial data once again underlines that industry has been and will remain a drag on German growth,” Brzeski added.

The less volatile three-month-on-three-month comparison showed that production was 0.9% lower from October to December 2024 than in the previous three months.

Industrial orders rose 6.9% month-over-month in December, driven by significant growth in large-scale orders such as aircraft, ships, trains, and military vehicles, according to the federal statistics office on Thursday.

Andrew Kenningham, chief Europe economist at Capital Economics, suggested a possible rebound in auto production in the near term and noted that falling interest rates may support business investment in subsequent months.

However, he observed that business surveys, such as the Ifo index, remain very low, and the rebound in European natural gas prices since mid-December will add to costs for energy-intensive firms. “All told, the structural decline in German industry looks set to continue,” Kenningham concluded.

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