BERLIN — Stronger manufacturing helped German industrial output to improve slightly in December, boding well for expectations that Europe’s largest economy may be rebounding from a weak quarter.

Data from the Economy Ministry showed on Thursday that output climbed by 0.3% on the month, just above the mid-range in a Reuters poll of 40 economists for a 0.2% rise. Forecasts ranged from -1.3 to +1.0%.

"A 1.2% increase in manufacturing is a decent number.... But the fourth quarter will nonetheless be very, very weak," said Andreas Scheuerle at Dekabank.

"I even expect gross domestic product (GDP) contracted by 0.5% but there won’t be a (formal) recession as the economy will return to growth again in the first quarter — orders and early indicators suggest that," he added.

While manufacturing output increased 1.2 on the month in December, energy and construction activities fell 3.4% and 8.9% respectively.

On a two-month comparison, however, even manufacturing fell 0.4% across November and December 2012 compared with the same period a year ago.

The manufacturing sector contributes around 21% of Germany’s GDP, according to World Bank figures.

Road to recovery

"The pick-up in manufacturing orders, as well as significant improvements in some important sentiment indicators in the last few months suggest we are nearing the end of the weak phase," the ministry said in a statement.

Data on Wednesday showed industrial orders climbed in December as demand from the eurozone rebounded. The latest sentiment surveys showed German business morale and investor sentiment rising.

"All in all, this week’s industrial data send two important messages. A good and a bad one: the first contraction of the German economy since the first quarter of 2009 has been confirmed but the rebound has already started," said Carsten Brzeski, senior economist at ING.

Thursday’s data offer hope to struggling manufacturing firms like steelmaker Salzgitter, which reported a bigger-than-expected full-year pretax loss and industrial bellwether Siemens, which said it will continue to focus on cost cuts.

A survey last week showed manufacturing contracted very slightly for an eleventh straight month in January but output and new business grew.

Many eurozone countries would be pleased to boast an industrial output like that of Germany. In recession-struck Spain, industrial production fell for a sixteenth straight month by 6.9% in December.

The output data for November was downwardly revised to a fall of 0.2% from an originally reported 0.2% increase.