German Industry Raised Output Before Virus Stalled Recovery

(Bloomberg) --

German manufacturers ramped up production just before the global coronavirus outbreak hit export demand and disrupted supply chains.

Output jumped 3% in January, the most in two years. The data signal that Germany’s troubled economy was seeing the first signs of a recovery, before new risks threatened to prolong a downturn. Companies from industry to the service sector have reported troubles with operations and orders since the epidemic started to spread.

A key focus this week will be Europe’s response to the epidemic, after monetary authorities and governments in heavily affected regions across the globe have sought to help their economies. Germany loosened rules for short-term work compensation and said it would step up investment, after Italy implemented significant spending measures, and the European Central Bank has signaled it’s working on a targeted dose of stimulus.

The ECB is scheduled to set monetary policy on Thursday, and economists are split as to what action it can afford to take after more than half a decade of unconventional support.

In January, construction benefited from mild weather and a rebound from December holidays. Manufacturing was bolstered by basic and investment goods. While the Economy Ministry said momentum stabilized in the past months with rising orders and improving confidence, it cautioned new risks to the outlook have emerged with the virus outbreak.

Data on Friday showed foreign and bulk orders supported the strongest jump in manufacturing demand in more than five years, yet purchasing managers’ indexes released since then suggest January’s trend may not have held. A separate release showed exports stagnated at the start of the year.

--With assistance from Harumi Ichikura and Kristian Siedenburg.

To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow

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