(Bloomberg) -- German industrial output unexpectedly declined in November, underscoring the persisting manufacturing woes in Europe’s largest economy.

Production declined 0.7% from October, led by capital goods, and intermediate goods, the statistics office said Tuesday. That’s the sixth consecutive drop and defies economists in a Bloomberg survey, who’d predicted a 0.3% increase. 

Germany probably ended 2023 with its first recession since the pandemic, as analysts reckon data will reveal a second straight contraction in output in the fourth quarter. Manufacturers — Germany’s economic backbone — are struggling from costly energy, higher global interest rates and a slowdown in China. 

What Bloomberg Economics Says...

“Disappointing November production data and the recent business expectations deterioration point to a bumpy start to the year for industry. We maintain our baseline view for a slight GDP increase in the first quarter of 2024, driven by a higher dynamic in the service sectors. There is substantial risk, however, that a more pronounced industry weakness will drag the economy down again in 1Q24.”

—Martin Ademmer, economist. For full React, click here

The figures come a day after a reading for factory orders also fell short of expectations. Additionally, with the government strait-jacketed over ramping up investment and train strikes looming this week, few economists anticipate much of a pickup this year.

German railway operator Deutsche Bahn AG’s attempt to halt strikes — due Wednesday-Friday — via a court injunction was rejected by Frankfurt’s labor court on Monday.

Speaking to Bloomberg TV after Tuesday’s data were released, Holger Schmieding, chief economist at Berenberg, said Germany is experiencing cyclical, rather than structural issues, and will bounce back as the manufacturing sector returns to “significant growth” in the second half of 2024.

“Germany was in recession last year, yes, but the indicators are starting to stabilize,” he said. “We are bottoming out in the German economy.”

--With assistance from Joel Rinneby, Kristian Siedenburg and Anna Edwards.

(Updates with economist in last two paragraphs.)

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