German Industrial Production Increases Most in a Year

German industrial production surged the most in more than a year in April as construction activity surged after an unusually long winter damped output.

Production jumped 1.8 percent percent from March, when it gained 1.2 percent, the Economy Ministry in Berlin said today. That’s the third consecutive increase and the strongest gain since March last year. Economists forecast no change, according to the median of 38 estimates in a Bloomberg News survey. From a year earlier, production rose 1 percent when adjusted for working days.

The Bundesbank downgraded its outlook for the German economy today, while pointing to a gradual recovery in the course of the year. Exports in April rose more than forecast, supporting the central bank’s view that trade with faster-growing markets in Asia and the U.S. will help offset the effects of six quarters of recession in the 17-nation euro area.

“The German economy is gradually exiting the weak phase that it had around the turn of the year,” Mario Gruppe, an economist at NordLB in Hanover, said before the release. “It is however a growth path that has a few potholes in it. It will be a recovery that now and again has setbacks.”

After the European Central Bank left interest rates at a record low of 0.5 percent yesterday, President Mario Draghi reiterated his view that the region’s economy will still return to growth this year.

Stocks Fall

European stocks fell today today, as investors awaited U.S. labor data. The Stoxx Europe 600 Index slipped 0.3 percent at 12:34 p.m. in Frankfurt, extending the biggest weekly drop in a year. The euro was little changed at $1.3248.

U.S. payrolls probably grew in May at a similar rate as the previous month, economists said before a Labor Department report today.

Elsewhere, South Korea said first-quarter gross domestic product rose 0.8 percent from the previous period, revising the prior estimate of a 0.9 percent expansion. Sri Lanka’s central bank left benchmark interest rates unchanged.

In Europe, Britain’s trade deficit narrowed more than economists forecast in April as imports declined faster than exports. The goods trade gap was at 8.2 billion pounds ($12.8 billion) compared with 9.2 billion pounds in March, the Office for National Statistics said. The median forecast in a Bloomberg News survey of 19 economists was for 8.8 billion pounds.

U.K. Consumers

Separately, the Bank of England said in a quarterly report that U.K. consumers surveyed in May anticipated prices would increase 3.6 percent over the following year, the same as in February.

In Greece, GDP shrank 5.6 percent in the first quarter compared with the same period a year earlier, the Hellenic Statistical Authority said in e-mailed statement today. That contraction is wider than May 15 preliminary estimate of 5.3 percent.Greece doesn’t publish seasonally adjusted GDP data or quarter-on-quarter results.

German manufacturing output rose 1.5 percent in April, with production of investment goods up 4 percent, today’s report showed. Construction surged 6.7 percent, while energy output dropped 1.5 percent.

“After the cold winter, main construction trades are already showing considerable recovery and catch-up effects,” the Economy Ministry said in the statement. “The prospects for a good result in the second quarter have thus improved further.”

Euro Crisis

Growth in the three months through June should be “quite strong,” the Bundesbank said today, after the economy grew only 0.1 percent in the first quarter. The Frankfurt-based central bank cut its 2013 growth projection to 0.3 from the 0.4 percent predicted in December, and said the economy would grow by 1.5 percent in 2014, down from the previously estimated 1.9 percent.

“Much will depend on whether the economic situation stabilizes in the euro-area crisis countries and whether expansionary forces will gradually gain the upper hand there,” Bundesbank President Jens Weidmann said in a statement. “A sustained upturn in the world economy is just as important as a precondition for the growth path we have assumed.”

With the euro area mired in the longest recession in its 14-year history, Germany’s recovery from contraction in the last three months of 2012 has proven uneven. While business confidence rose for the first time in three months in May, factory orders dropped in April.

Car Sales

Audi AG, the world’s second-largest maker of luxury cars, said on May 16 that high-performance models like the RS5, as well as the new version of the A3 compact, will help propel sales this year amid intensifying economic headwinds.

After increasing in April, German new car sales resumed a decline in May, the German Federal Motor Vehicle Office, or KBA, said on June 4. The European auto market is contracting for a sixth consecutive year to a two-decade low.

“German industrial data are volatile at the moment but overall there’s evidence that the hard numbers are beginning to catch up with the sentiment indicators,” Frederik Ducrozet, an economist at Credit Agricole CIB in Paris, said before the report was published. “The economy is on a better footing, but as it is so export-focused a shock in Asia or the U.S. will have an impact.”

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