German factory output up but tariff threat looms

German industrial production rose unexpectedly strongly in May, official data showed Monday, boosting hopes that Europe's top economy has turned a corner despite trade tensions with the United States.

Industrial production rose by 1.2 percent month-on-month, after dropping 1.6 percent in April after US President Donald Trump announced swingeing tariffs, the federal statistics agency Destatis said.

Analysts polled by financial data firm FactSet had forecast a slight decline of 0.1 percent.

The rebound was driven by a surge in energy output and a strong performance from the beleaguered automotive sector, where production was up 4.9 percent.

Overall, industrial production was up one percent on the same month last year, underlining hopes that the worst might be over for German industry after a series of strong production and orders data releases since the start of the year.

ING bank analyst Carsten Brzeski said the data "increased the likelihood" that the industrial recovery of recent months was driven by more than "front-loading" as a result of customers putting in orders before US tariffs take effect.

"It's too early to give the all-clear, but signs of at least a cyclical rebound, albeit from low levels, are increasing", he said.

The outlook was nevertheless troubled by the potential imposition of swingeing reciprocal tariffs that were announced by Washington in April but promptly suspended for 90 days.

The new import taxes are finally set to come into effect on Wednesday -- barring a deal or a fresh delay -- and would see EU goods slapped with a blanket 20-percent tariff rate.

"With the suspension of reciprocal US tariffs set to expire soon, the outlook remains highly uncertain," the economy ministry warned in a statement.

"The ability of manufacturing to regain momentum over the summer will largely depend on how the trade and geopolitical landscape evolves," it said.