German Federal Minister of Economics and Technology Dr. Karl-Theodor Freiherr zu Guttenberg

German industrial output surged the most in 16 years in May, in a signal of recovery in the Eurozone's biggest economy.

Production rose 3.7% in May  from April, when it dropped 2.6 percent, the Economy Ministry in Berlin announced today. the rise was the biggest gain since August 1993, when it rose 4.1% according to Bundesbank data. From a year earlier, output fell 17.9% when adjusted for the number of work days.

On Monday it was reported that manufacturing orders rose the most in almost two years in May, while business confidence increased for a third month in June.

The German government has forecast that GDP (gross domestic product) will shrink by 6% in 2009, the most since World War II.

The fall in industrial production in April was worse than an initially reported 1.9 percent decline the ministry said.

Between January and April, official data has shown that more than 10,000 companies declared insolvency in the country, which depends heavily on exports for growth.

Large and small companies have been hit hard by the global economic slump, and chemical giant BASF said Tuesday that it would eliminate 3,700 jobs by 2013.

In the year to April, exports plunged by 28.7%.

"Given firmer orders, the prospects for a positive development in industrial production have improved," the ministry said in a statement.

Germany accounts for about 30% of Eurozone economic output and is the biggest of the 16 members, followed by France, Italy and Spain.