German industrial output rose unexpectedly in August but analysts said the small pickup did not signal the end of a long manufacturing contraction that risks tipping Europe's biggest economy into recession.
German industrial output rose 0.3% on the month, Statistics Office figures showed today, beating expectations of a 0.1% drop.
The rise was driven by production of intermediate and capital goods, the Economy Ministry said.
Manufacturing rose 0.7% while construction fell by 1.5%, the data showed.
Germany's export-dependent manufacturing sector is already in recession. That has dragged on the economy as a whole, which shrank in the second quarter.
Economists expect another slight economic contraction in the three months from July to September.
Uncertainties linked to Britain's planned departure from the European Union and global trade disputes are starting to hurt Germany's labour market, which has been the backbone of a consumption-driven growth cycle as exports weaken.
July's output reading was revised up to a fall of 0.4% from a previously reported drop of 0.6%.
Data yesterday showed that industrial orders had fallen more than expected in August on weaker domestic demand.
Chancellor Angela Merkel's right-left coalition government has resisted calls for a substantial spending package to offset the slowdown and put the economy back on a growth path.
Peter Vanden Houte of ING warned it was too early to talk about a trend reversal in German manufacturing despite August's rise in output, adding that the big picture remains negative.
"The omen remains bleak," he wrote in a note. "As long as world trade stagnates, German industry and by extension the whole German economy is almost certainly bound to languish."
Prolonged weakness in Germany, a bellwether for the economic health of the euro zone, would be a headache for the European Central Bank, which in September pledged indefinite stimulus to revive the bloc's economy.
Economists and German business lobby groups have urged Merkel to ditch her policy of no new debt and borrow to fund a stimulus package for the economy.
Pressure on her to act will intensify if the economy continues to weaken.