German factory output rises but Ukraine clouds loom

FRANKFURT — German industrial production rose in February, official data showed on Thursday, but analysts warned it would be the last bit of good news for a while, especially as the Ukraine war darkens the economic picture.

Output increased by 0.2 per cent month-on-month, the federal statistics office Destatis said, in figures adjusted for seasonal swings.

The increase was driven by a 4.9-per cent jump in energy production, while manufacturing saw only weak growth and construction output was down compared with January.

Thursday's data showed "what the German economy could have looked like", said ING bank economist Carsten Brzeski, as Europe's top economy seemed on track to shake off last year's supply chain strains and coronavirus-related restrictions.

But that was before Russia's February 24 invasion of Ukraine and Western sanctions against Moscow caused renewed disruption to global supply chains and sent energy prices soaring, fuelling concerns about already high inflation.

"The war in Ukraine has not only dramatically changed the world but also the outlook for the German economy," Brzeski said.

Automakers Volkswagen, BMW and Mercedes-Benz are already feeling the squeeze, with a lack of critical car parts from Ukrainian factories forcing them to curtail production at some plants, while exports to Russia have been halted.

Germany's economy ministry warned that the country's crucial industrial sector was headed for a slowdown, a day after other data showed a fall in new orders in February.

"Uncertainty about the future course of the economy has increased massively," the ministry said in a statement.

The German Council of Economic Experts, which advises the government, last week slashed its growth forecast for 2022 to 1.8 per cent, down from 4.6 per cent previously.