(Bloomberg) -- German factory orders unexpectedly rose — signaling a small rebound as Europe’s largest economy grapples with an industrial downturn.

Data released Tuesday showed a 8.9% increase in demand in December from the previous month. That jump —defying a median economist estimate of a 0.2% decline — was thanks to major orders, without which there would have been a 2.2% drop, Destatis said. 

A less volatile three-month reading for the final quarter of the year showed an 0.1% uptick from the previous period. For 2023 as a whole, factory orders declined 5.9%. 

“The massive increase in orders in December” can’t “obscure the actual situation in the German manufacturing sector, which remains very tense,” said Joerg Angele, an economist at asset manager Bantleon. “The collapse in orders in the automotive industry and mechanical engineering, both backbones of the German economy, is particularly alarming. The prospects for production therefore remain poor for the foreseeable future.”

Germany’s is struggling to bounce back from an industrial slump caused by the energy crisis and weak global demand. Gross domestic product contracted by 0.3% in the final quarter of last year, and while the country dodged a recession, the outlook is bleak.

The Bundesbank expects output to “stagnate at best” in the first three months of 2024, citing a continued decline in foreign orders and cautious consumers. The Ifo institute’s sentiment index also signaled that an upturn is still a long way off.  

Data on inflation and employment were more positive. Consumer-price growth slowed more than expected in January, to 3.1%, and a drop in joblessness underscored labor-market resilience.   

But while parliament passed a bill settling a budget dispute for 2024, next year’s finance plan is still outstanding. Elsewhere, there’s protracted chaos from striking airport staff and protesting farmers.  

Speaking at a Bloomberg event in Frankfurt on Monday, German Finance Minister Christian Lindner said that his country is suffering because of its failure to boost output.  

“We are no longer competitive,” he said. “We are getting poorer because we have no growth. We are falling behind.” 

--With assistance from Kristian Siedenburg, Joel Rinneby and Mark Schroers.

(Updates with analyst comment in fourth paragraph. An earlier version of the story corrected the number of monthly increases.)

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