German Industrial Output Rebounds In February, Boosts Recovery Hopes

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Germany's industrial production rose more-than-expected in February, helped by an increase in manufacturing output, underpinning hopes that the biggest euro area economy is on the recovery path after shrinking in the final months of 2012, latest data showed on Monday.

Industrial production advanced a seasonally and working-day adjusted 0.5 percent sequentially, reversing January's revised 0.6 percent decrease, the Economy Ministry said. Economists had expected production to grow by 0.3 percent in February, marking an improvement from January's originally reported flat level.

"February's German industrial production figures suggest that the economy's engine of growth is still just about ticking over, but only very slowly," Capital Economics Senior European Economist Jennifer McKeown said.

"While the monthly production numbers are not a perfect guide to the industrial component of GDP, this suggests that industry acted as less of a drag on overall economic growth in Q1."

Driving the growth, manufacturing production increased 0.5 percent, reversing the 1.1 percent fall seen in the previous month. Energy output and production of capital goods increased 3.9 percent and 2.4 percent respectively from the previous month. There was a 0.3 percent rise in the production of intermediate goods.

Meanwhile, production of consumer goods dropped by 2.5 percent, and construction output decreased by 2.7 percent, weakening the pace of overall growth.

Compared to February 2012, industrial production decreased a working-day adjusted 1.8 percent, slower than the revised 2.6 percent decrease seen in the previous month. Economists had forecast output to fall 0.9 percent, following the 1.3 percent decrease originally reported for January.

Last week, data released by the Economy Ministry showed that new orders received by German manufacturers increased a more-than-expected 2.3 percent in February, driven by both domestic and foreign demand, after falling 1.6 percent in January.

In contrast, the Purchasing Managers' survey for the month of March that is compiled by Markit Economics showed that Germany's private sector activity reached near-stagnation levels in, with new orders dropping for the first time so far this year.

Another survey by Markit showed last week that the German construction sector contracted at the fastest pace in more than a year in March, owing to a sharp and accelerated fall in home building activity amid bad weather conditions.

Results of the latest GfK survey revealed that consumer confidence in Europe's largest economy is set to remain unchanged in April. However, the firm said that the impact of the Cypriot financial crisis on the German household sentiment is yet to be measured.

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