German industrial output plunged steeper than expected in December, posting the largest drop in three years, adding new signs that Europe's leading economy finally encounters the looming haze caused by the debt crisis, official data showed Tuesday.

The Ministry of Economy reported that German industrial production fell 2.9 percent month on month in December from stagnation in November, the biggest decline since January 2009. Experts had predicted the output of December would continue to stagnate.

Data showed that several key sectors' weaker performance contributed to the decline, with manufacturing down by 2.7 percent, energy output dropping 2.2 percent and construction sector 6.4 percent.

For the fourth quarter as a whole, the output shrank 1.9 percent, consistent with the wide expectation that the German economy would turn to a slight recession of 0.25 percent in the last three months of 2011.

However, many officials and economists said the decline was only short lived, and the German economy would rebound in the second half this year, although the speed of growth would be much slower than last year, effected by the lasting eurozone debt crisis and sluggish global economy.

On Monday, the ministry said the country's factory orders jumped 1.7 percent in December following a contraction of 4.9 percent in November. Orders from non-eurozone countries surged 12.3 percent, showing that the outside demands would partly offset German companies' loss within Europe.

Meanwhile, the German seasonally-adjusted jobless queues shrank 34,000 to 2.285 million in January, pushing the unemployment down to 6.7 percent, a record low since its unification 20 years ago.

"The stabilization of industrial orders, along with the pickup in economic sentiment indicators are the first signs that the weak phase has been overcome," the ministry said Tuesday.

The German government forecast that the country's economy would expand 0.7 percent in 2012, after a solid growth of 3 percent last year.