By Joseph Nasr
BERLIN (Reuters) - German industrial output fell unexpectedly in January for the second month in a row and exports also sank, adding to signs that Europe's largest economy began the year on a weak footing, although analysts said the outlook remains robust.
The data on Friday was seen as a reflection of seasonal factors rather than signalling a structural slowdown. Economic activity in Germany typically eases in the winter months because of extended holidays, while this year's unusually warm January led to a decline in energy output.
Industrial production fell by 0.1 percent, the Economy Ministry said, its second consecutive fall after a dip of 0.5 percent in December and confounding expectations in a Reuters poll for a 0.5 percent rise.
Separate figures from the Federal Statistics Office showed both exports and imports had fallen unexpectedly by 0.5 percent in January, undershooting a Reuters forecast for a 0.3 percent increase in exports and stagnating imports.
The seasonally adjusted trade balance was unchanged at 21.3 billion euros ($26.22 billion).
The figures come one day after industrial orders slumped by a bigger-than-expected 3.9 percent in January.
"The weak start to the new year is nothing new for the German economy," Carsten Brzeski of ING Diba said in a note.
"It is a phenomenon witnessed more often in recent years that German economic data has been overly sensitive to seasonal effects and vacation planning."
Unusually warm weather resulted in activity in the energy sector falling by 3.3 percent. Construction sank by 2.2 percent, a breakdown of the output data showed. Manufacturing output was hampered by workers' strikes.
"We expect production to rebound in February," Stephen Brown of Capital Economics wrote in a note. "After all, unseasonably cold weather will have boosted energy output and, more generally, the business surveys paint a positive picture of underlying conditions."
DIALOGUE, NO TRADE WAR
The prospects for the German economy look rosy, with capacity utilisation at its highest level since 2008 and companies reporting full order books.
U.S. President Donald Trump's import tariffs are one of the main risks for Germany, which last year exported more to the United States than any other country.
"Some darker clouds have appeared in the German economic sky," said Brzeski, referring to Trump's steep tariffs. "New protectionism would definitely hurt the self-proclaimed export world champion."
The tariffs have alarmed the German government and industry groups, who have urged a commitment to free trade.
Chancellor Angela Merkel, expected to be elected for a fourth term by parliament next week, heading a right-left coalition, said the best way to avoid a trade war between the European Union and the United States was to exempt the bloc from the tariffs.
"We trust the European Commission, which is responsible for trade policy, and it has presented measures that we could implement," Merkel said after talks with business leaders in the Bavarian city of Munich.
"But we prefer to have discussions first," she added. "The best option would be (for the EU) to be excluded (from the U.S. tariffs) and the European Commission has said that."
The EU's trade chief said on Friday the bloc expects to be excluded but will go to the World Trade Organization to impose its own measures if Washington presses ahead.
Germany's steel association called on the EU to come up with effective countermeasures to protect the local steel industry.
"With this decision, the USA has largely sealed itself off from the rest of the world," association president Hans Juergen Kerkhoff said in a statement, adding there was a risk that steel might now flood the European market.
BDI President Dieter Kempf said he did not believe the era of free trade was over after Trump's announcement of tariffs on steel and aluminium imports, and that EU should not over-react.
But "the U.S. needs to feel some pressure", he added, urging dialogue to avoid an all-out trade war.
($1 = 0.8122 euros)
(Additional reporting by Christoph Steitz in Frankfurt and Alexander Huebner in Munich; Editing by Catherine Evans)
Disclaimer: No Business Standard Journalist was involved in creation of this content
