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German Industrial Output Declined More Than Forecast in February

European Central Bank President Mario Draghi
The European Central Bank yesterday kept its benchmark interest rate at 1 percent, matching a record low, with President Mario Draghi forecasting the euro-region economy will show a “moderate recovery” this year. Photographer: Hannelore Foerster/Bloomberg

German industrial output fell more than economists forecast in February as cold weather kept workers off construction sites.

Production decreased 1.3 percent from January, when it rose a revised 1.2 percent, the Economy Ministry in Berlin said today. Economists forecast a drop of 0.5 percent after a previously reported gain of 1.6 percent in January, the median of 37 estimates in a Bloomberg News survey showed. In the year, production fell 1 percent when adjusted for working days.

“It was a freezing February, so a drop is a one-off effect,” said Alexander Koch, an economist at UniCredit Group in Munich. “Overall, the German economy is in good shape and we expect a gradual strengthening for the rest of the year.”

Europe’s largest economy may avoid a recession as unemployment at a two-decade low encourages consumer demand and a strengthening U.S. economy bolsters export orders. Business and investor sentiment rose last month after Greece received a second bailout and the European Central Bank pumped more than 1 trillion euros ($1.3 trillion) into the banking system to counter the region’s fiscal crisis.

Construction output slumped 17.1 percent in February from the previous month, when it rose 4.7 percent, today’s report showed. Production of investment goods such as machines rose 0.3 percent, while energy output advanced 1.6 percent.

‘Bitterly Cold’

The first half of February was “bitterly cold,” pushing down the average temperature for the full month to minus 2.6 degrees centigrade, according to the German weather service. The ministry said the “unusual cold spell” was the main reason for the slump in construction output in February.

In the U.K., manufacturing output unexpectedly declined for a second month. Factory production fell 1 percent from January, the most since April, the Office for National Statistics in London said today.

German companies have relied on faster-growing markets to bolster their sales as European governments from Spain to France cut spending. While the 17-member euro economy will contract 0.3 percent this year, German gross domestic product may increase 0.6 percent, according to the European Commission.

Adding to signs of stabilization after an economic contraction of 0.2 percent in the fourth quarter, German factory orders increased in February and business confidence rose to an eight-month high in March.

Euro-Region Recovery

In the U.S., the world’s largest economy, an improving labor market has helped underpin demand and bolster consumer sentiment. Private employment climbed 209,000 in March after a February increase of 230,000, which was more than initially estimated. A Labor Department report on April 6 is projected to show private employment, which excludes government jobs, climbed by 215,000 in March.

The European Central Bank yesterday kept its benchmark interest rate at 1 percent, matching a record low, with President Mario Draghi forecasting the euro-region economy will show a “moderate recovery” this year.

“Survey data confirm a stabilization in economic activity at a low level in early 2012,” he said at a briefing in Frankfurt. “We continue to expect the euro-area economy to recovery gradually in the course of the year.”

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