Euro zone industrial output grows quicker than expected in January

FRANKFURT (Reuters) - Euro zone industrial production grew faster than forecast in January, driven by a quick expansion in Germany, which erases some but not all earlier losses, data from Eurostat showed on Thursday.

Industrial production in the 20 countries sharing the euro grew by 0.8% on the month, more than the expected 0.6%, as a 2.3% expansion in Germany offset negative readings in Italy and Spain, Eurostat said.

Compared with a year earlier January's output was unchanged, an improvement on the -1.5% year-on-year reading for December. However, output is still 3% down on its 2021 level.

Industrial activity in Germany, the bloc's biggest economy, has been in recession for the past two years as high energy costs, intense competition from China, out of fashion car models and anaemic productivity growth have all cut into sales.

But economists say German industry has likely hit the bottom, with U.S. tariffs now posing the biggest threat to recovery.

Indeed, German manufacturing orders fell 7% in January, indicating that the sector remains fragile and the bottoming out has not yet been followed by any meaningful expansion.

Still, potential fiscal stimulus announced by the incoming government could boost the fortunes of the sector.

Across the entire euro zone, energy production fell sharply on the month as did the output of consumer goods, Eurostat said.

However, the output of capital goods, which includes machinery and tools, was up, as was the output of intermediate goods, or semi-finished products needed in manufacturing.

(Reporting by Balazs Koranyi; Editing by Hugh Lawson)