Germany's industrial production increased by 2 percent month-on-month in January, indicating a tentative rebound in economic activity at the start of the year, according to preliminary data released by the Federal Statistical Office on Monday.

The rise was largely driven by a strong recovery in the automotive sector, where output surged by 6.4 percent in January, following a steep 10-percent decline in the previous month.

"Although previous production losses were partially offset in January, there are still no signs of a broader recovery in the manufacturing sector," Germany's Economy Ministry stated on Monday. The ministry cautioned that a sustained rebound in industrial production remains unlikely, citing a sharp decline in incoming orders and rising geopolitical uncertainties.

Data from the statistical office showed that new orders in German industry fell by 7 percent in January compared to the previous month, with domestic orders plunging by 13.2 percent.

Carsten Brzeski, global head of Macro for ING Research, noted that while January's production figures may signal the bottoming out of Germany's industrial slump, the contraction in new orders, weak foreign demand, and high inventory levels "paint a rather unflattering picture of a nation known as an industrial powerhouse."

With looming U.S. tariffs on the European Union and other protectionist measures, the short-term outlook for German industry remains uncertain, Brzeski warned, highlighting potential negative impacts on German exports and investment, as companies may opt to relocate production to the United States to bypass trade barriers. 

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