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By Dave Graham
BERLIN, Jan 9 (Reuters) - German industrial output in November posted its biggest annual fall in 1-1/2 decades, dragged down by a sharp downturn among manufacturers that is threatening to cause the worst recession in the country's post-war history.
Preliminary Economy Ministry figures on Friday showed output fell by 10 percent year-on-year as demand for cars and other capital goods faded across the globe. This was the biggest fall since 1993, according to the Federal Statistics Office.
Analysts spoke of a "collapse" in German manufacturing, and the latest round of weak data are expected to put more pressure on the European Central Bank to cut its main lending rate again next week from the current level of 2.5 percent.
"We're at the start of a really deep recession," said Juergen Michels, an economist at Citigroup in London. "Our basis scenario for gross domestic product in 2009 is a contraction of 1.5 percent. But it could be down by up to 5 percent."
Compared with the previous month, output fell by 3.1 percent in seasonally adjusted terms. This was bigger than the decline of 2.0 percent that had been forecast in a Reuters poll.
Since World War Two, German gross domestic product (GDP) has never contracted by as much as one percent over a full year, but more and more analysts are saying the economy is likely to shrink by much more than that this year.
A senior government source told Reuters on Friday Chancellor Angela Merkel's government believes the economy shrank by around 1.5 to 2.0 percent during the final quarter of 2008.
This would be the biggest contraction since Germany reunified in 1990, according to Bundesbank figures.
UNEMPLOYMENT RISING
One ray of light has been consumer spending, which has so far held up relatively well during the economic crisis.
Data earlier on Friday showed German retail sales rose by 0.7 percent on the month in November, and likely increased in December too, according to the Federal Statistics Office.
However, with unemployment rising for the first time in nearly three years in December, many economists believe sales could weaken in the course of this year as the manufacturing slump starts to leave its mark on the job market.
The Economy Ministry's figures showed that manufacturing output fell by 3.5 percent on the month, and energy production by 0.2 percent. Construction output was unchanged.
Manufacturing orders have fallen steeply since late last year. In the November-October period, orders were down by nearly a quarter from the same two months a year earlier.
Many famous names in German industry have been hit hard.
German carmaker BMW
A range of leading manufacturers -- among them big carmakers -- have announced cuts to production and temporary shutdowns due to weakness in demand both at home and abroad.
"Some carmakers had announced longer Christmas holidays and that'll be reflected in December and January data so the weakness will continue," said Michels at Citigroup.
The Economy Ministry said due to the decline in orders, output was likely to stay negative in coming months. (Writing by Dave Graham, additional reporting by Rene Wagner, Paul Carrel, Madeline Chambers and Kerstin Gehmlich)