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Decline In German Industrial Production Worse Than Expected


Germany's industrial production fell more than expected in February, reflecting a wide spread contraction in manufacturing and construction sectors.

Industrial output dropped 1.3 percent in February from a month ago, offsetting January's 1.2 percent growth, according to the report released by the Federal Ministry of Economy and Technology on Thursday.

Economists had forecast a 0.5 percent decrease for February. The latest contraction has triggered concerns about the strength of Eurozone's growth engine to support the recovery.

Construction output plunged 17.1 percent month-on-month after rising 4.7 percent a month ago. Manufacturing output was down 0.4 percent, versus a 1 percent gain in January. On the other hand, growth in energy output accelerated to 1.6 percent from 0.4 percent.

Industry will now act as a serious drag on overall GDP in the first quarter, making it very likely that Germany entered a technical recession, said Capital Economics Chief European Economist Jonathan Loynes.

On a yearly basis, industrial production slipped by an adjusted 1 percent, reversing a 1.5 percent rise in January. The figure was in contrast to the 0.5 percent rise forecast by economists.

Meanwhile, the unadjusted industrial output grew 1.2 percent annually, slower than the 4.6 percent increase in January.

The latest report confirmed the softness revealed by Markit's Purchasing Managers' survey, which pointed to a contraction in the German manufacturing sector in March. Lower new orders were primarily responsible for the overall deterioration in manufacturing operating conditions.

Data published on Wednesday showed that factory orders logged a modest 0.3 percent monthly expansion in February.

The Organization for Economic Co-operation and Development forecasts that the German economy will grow 0.1 percent in the first quarter, with the pace expected to accelerate to 1.5 percent in the second quarter.

by RTTNews Staff Writer

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