German factory growth beats expectations

German factory output rose faster than expected in October as booming car sales fuelled growth in Europe's biggest manufacturing sector.

Industrial production rose 3.2 % from September and fell 3% from October 2019, the federal statistics office said. The month-on-month increase was double economists' average forecast as compiled by Reuters.

The increase was driven by a revival in Germany's car industry, its biggest industrial sector, helped by government incentives to buy hybrid and electric cars. Vehicle production surged 9.9% from September leaving production just 6% less than pre-crisis levels.

Overall industrial production was 4.9% less in October than in February, the month before the first Covid-19 restrictions were imposed.

The figures add to indications that Germany's manufacturers could keep Europe's biggest economy growing in the fourth quarter. November's eurozone purchasing managers' index showed German business activity growing despite weak services while countries such as France and Spain shrank overall.

Claus Vistesen, Pantheon Macroeconomics's eurozone specialist, said: "This is a solid headline, consistent with both hard and soft leading indicators. The probability that German GDP will not fall outright in the fourth quarter is increasing."