German Industrial Production Rises On Robust Construction Growth

Germany's industrial production rose in February after stagnating at the start of the year, driven by a surge in construction, while manufacturing output dropped leading to a further worsening of expectations of a rebound in the biggest euro area economy.

Industrial production grew a price, seasonally and calendar adjusted 0.7 percent, preliminary figures from the Federal Statistical Office showed on Friday, which was slightly slower than the 0.8 percent gain economists had predicted.

January's originally reported decline of 0.8 percent was revised to 0 percent.

Energy production decreased 3.1 percent, while the output in construction grew 6.8 percent in February.

The mild weather contributed to the boom in the construction sector in February, the economy ministry said. A survey from IHS Markit showed on Thursday that the German construction sector grew the most in 14 months in March, led by strong gains in residential and commercial activity that boosted job creation.

Excluding energy and construction, production fell 0.2 percent from the previous month in February.

Capital goods output increased by 0.6 percent, while the production of intermediate goods decreased by 0.6 percent. Manufacture of consumer goods shrunk 1.6 percent.

The industrial activity is set to remain muted in coming months, due to weak order growth and the gloomy business climate, the economy ministry said.

Data released on Thursday showed that Germany's manufacturing orders unexpectedly decreased in February at the fastest pace in over two years, mainly driven by a slump in foreign demand.

On Thursday, the country's leading economics research institutes slashed their forecast for economic growth this year, but re-affirmed that the likelihood of a recession is very small.

On a year-on-year basis, industrial production fell 0.4 percent in February after a 2.7 percent slump in January. Economists had expected a 0.8 percent fall.

In the January to February period, production rose 0.8 percent from the previous two months, led by a 4.4 percent jump in construction. Industrial production dropped 0.1 percent and the automobile industry reported a 1 percent fall in output.