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German February Industrial Output, Exports Recover

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Germany's exports and industrial production recovered at a faster-than-expected pace in February, boosting hopes of strong recovery in the growth engine of Eurozone during the first quarter, despite the weakness in new orders.

Driven by capital goods output, industrial production rose a seasonally and working-day adjusted 0.2 percent in February from the prior month, the Economy Ministry reported Thursday. It was faster than economists' expectations for a 0.1 percent rise.

In January, production had fallen 0.4 percent, which was revised down from a 0.6 percent increase.

Year-on-year, industrial production declined unexpectedly by 0.3 percent after staying flat in January. The annual rate for January was revised down from a 0.9 percent increase.

After the weather-related high production in January, construction output declined in February, the ministry said. Given the positive mood of companies, industrial production is likely to rise in the first quarter.

Factory orders dropped unexpectedly by 0.9 percent in February, which was the second consecutive fall, data showed Wednesday. The decrease was due to the stagnation in domestic demand and a fall in foreign bookings. However, the Economy ministry said the trends in industry are pointing upwards.

A report from Destatis showed that exports grew 1.5 percent in February from January, when it declined 2.1 percent. Economists had forecast a growth of 1 percent.

Similarly, imports advanced 1.8 percent, reversing January's 0.2 percent fall. The monthly growth was faster than a 1.2 percent rise forecast by economists.

On a yearly basis, exports climbed 3.9 percent, in contrast to a 0.6 percent drop in January. Similarly, imports gained 0.8 percent versus the prior month's 2.2 percent fall.

As a result, the trade surplus increased to EUR 19.2 billion from about EUR 15.9 billion in January. It was forecast to rise to EUR 19 billion. The trade surplus came in at around seasonally adjusted EUR 19.7 billion in February.

The current account also showed a surplus of EUR 16.6 billion in February compared to EUR 15.9 billion surplus seen a month ago. But the current level was below the consensus forecast of EUR 17.5 billion.

Data from the Economy Ministry showed that excluding energy and construction, industrial output gained 0.5 percent in February. While energy output increased 1.2 percent, production in construction fell 3.1 percent.

Within industry, the production of capital goods rose 1.2 percent and that of intermediate goods increased by 0.2 percent. Meanwhile, consumer goods production dipped 0.3 percent.

The most encouraging signal for the German industry comes from the weaker euro, Carsten Brzeski, an ING Bank NV economist said.

Judging from earlier episodes with similar exchange rate weakness, order books are currently only moderately filled, the economist said. If past performances are any guide for the future, German exporters can start rubbing their hands, he added.

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