German industrial output rose in January at its fastest pace in more than six years, showing that the engine room of Europe's largest economy began 2016 well despite the financial market turmoil that has hurt business sentiment. Output rose by 3.3 percent on the month, data from the Economy Ministry showed on Tuesday, surpassing the mid-range forecast in a Reuters poll for a 0.5 percent gain. The rise was the biggest since September 2009.
Relatively mild winter weather allowed construction output to rise by 7.0 percent on the month. Capital goods were another bright spot, rising 5.3 percent. However, analysts said the economy faced challenges. "Order books are still not filled and the production boom coincides with inventory reductions," said ING economist Carsten Brzeski. "Moreover, the drop in confidence indicators and production expectation over the last months suggest that things could still first get worse before they really get better for German industry," he added.
Industrial orders fell in January, but a spike in orders from euro zone countries cushioned a drop in demand from domestic customers, data showed on Monday. Companies have also been unnerved by turmoil on global financial markets earlier this year and a slowdown in key export markets, including China. Sentiment among German manufacturers plunged in February by the largest margin since the bankruptcy of Lehman Brothers in 2008, deepening concerns about the health of the economy.
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