By Maria Martinez

BERLIN (Reuters) - German industrial output rose in January but exports plunged, suggesting the outlook for the euro zone's largest economy remains anything but rosy.

German exports fell by 2.5% in January compared with the previous month, data from the federal statistics office showed on Monday. The result compared with a forecast 0.5% increase in a Reuters poll.

Imports rose by 1.2% in January compared with the previous month, the data showed.

Germany, Europe's biggest economy, was last year the only G7 country to post a contraction for two consecutive years. A trade conflict with the U.S., its main trading partner, would deliver a big hit to output.

The foreign trade balance showed a surplus of 16.0 billion euros ($17.34 billion) in January, down from 20.7 billion euros in December 2024, and down from 25.3 billion euros in January 2024.

Exports to EU countries dropped by 4.2% on the month, while exports to countries outside the EU decreased by 0.4%.

Most German exports went to the U.S. in January, although exports were down 4.2% compared with December 2024.

Meanwhile, German industrial production rose in January by 2.0% compared with the previous month, the federal statistics office said. Analysts polled by Reuters had predicted a 1.5% rise.

After revision of the provisional results, production decreased by 1.5% in December 2024 compared with November, instead of the 2.4% decline previously reported.

Despite the positive figure for January and the upward revision in December data, the less volatile three-month on three-month comparison showed that production from November to January was at the level of the previous three months, showing the stagnation in the sector.

German industrial orders in January fell by 7% from the previous month.

($1 = 0.9229 euros)

(Reporting by Maria Martinez in Berlin, Paolo Laudani and Anastasiia Kozlova in Gdansk, Editing by Miranda Murray and Ed Osmond)