BERLIN: Plunging car production drove an unexpected drop in German industrial output in January, as the engine room of Europe’s largest economy stuttered on trade tensions and unease about Brexit.

A global slowdown, tariff disputes sparked by US President Donald Trump’s ‘America First’ policies and a potentially chaotic British departure from the European Union threaten to bring a decade-long expansion in export-reliant Germany to an end. Its economy only narrowly avoided recession last year. The same factors are impacting the rest of the EU, and Monday’s data added weight to a dovish policy shift by the European Central Bank last week as safe-haven bonds rose.

“Industrial production is hard data and it is really cementing the impression that the European economy is slowing down,” said Mizuho rates strategist Antoine Bouvet.

“It is lending credibility to the view that the slowdown is not temporary.”

German business daily Handelsblatt said on Monday the federal government had cut its in-house GDP growth outlook to 0.8 per cent for 2019, the second reduction in less than two months.

Industrial output dropped 0.8 per cent, well below market expectations for a rise of 0.5 per cent, Germany’s Statistics Office said.

The figure for December was sharply revised up, however, to a 0.8 per cent increase from a previously reported 0.4 per cent drop, and the euro recovered ground after a brief dip.

Automobile production fell by 9.2 per cent on the month in January, separate data from the Economy Ministry showed.

It blamed special factors such as strikes at suppliers and a switch to new brands for the weak performance, though German carmakers are also at the sharp end of a sectoral dip driven by a slowdown in China.

Reuters