The industrial sector closed 2024 on a downward trajectory, with December's production dropping 2.4 percent month-over-month, 1.4 percentage points below the consensus and marking the lowest level since May 2020. On an annual basis, output declined by 3.1 percent, 1.0 percentage points below the forecast estimates and reinforcing the sustained contraction seen throughout the year.

The automotive industry bore the brunt of the decline, plunging 10.0 percent, alongside machine maintenance and assembly (minus 10.5 percent). Capital goods production fell 4.7 percent, reflecting weak investment appetite. However, pharmaceutical production surged 11.6 percent, acting as a rare bright spot.

Despite the overall slowdown, energy-intensive industries stabilised (0.6 percent), a modest improvement after steep declines in previous years. Interestingly, other transport equipment (for example, aircraft, ships, military vehicles) saw a 6.5 percent uptick, benefiting from large-scale orders.

With persistent structural weaknesses in key sectors, 2025's outlook hinges on global demand recovery, investment incentives, and stability in energy markets to reignite industrial momentum. The latest update takes the RPI to minus 9 and the RPI-P to 7, meaning that economic activities are within the expectations of the German economy.

Industrial production is expected to fall back with output down 1.0 percent on the month in December and down 2.1 percent from a year ago. Output rose 1.5 percent on the month in November and was down 2.8 percent on year.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Like the manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.