German industrial output drops as its economy drifts into recession

German industrial production fell slightly in October, official figures published have showed, as analysts saw Europe's largest economy drifting towards a winter recession.

Output dropped 0.1 percent in October on the previous month, according to preliminary data from federal statistics agency Destatis on Wednesday.

Updated figures showed that production rose more strongly than previously thought in September, up 1.1 percent instead of 0.6 percent.

Despite the positive September revision and recent improvements in business confidence indicators, October's lacklustre reading showed an economic downturn was closing in, analysts said.

"The German economy has not fallen off a cliff but continues its long slide into recession," said Carsten Brzeski, head of macro at ING bank.

READ MORE: Germany 'on course for recession' as industrial orders drop

Rising energy costs

Sizeable government interventions to mitigate the impact of rapidly increasing energy costs in the wake of the Russian invasion of Ukraine have helped, Brzeski said.

Berlin has signed off on a 200-billion-euro ($209-billion) package to mitigate the impact of painful price rises for consumers and businesses.

The measures include an energy price cap to come into force next year, which will see the cost for a percentage of typical usage limited to lower-than-market prices.

"The government's fiscal stimulus is substantial enough to cushion the contraction and to turn a severe winter recession into a shallow one," he said.

But "the downsides still outweigh the upsides", he warned, as incoming orders had dropped and global trade seemed to be weakening.

Rising costs have particularly pinched production in energy-intensive industries.

Output in the sector was down 3.6 percent in October on a month, and 12.6 percent on a year, according to Destatis.

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