Photographer: Krisztian Bocsi/Bloomberg

German Industrial Production Declines Less Than Forecast

  • Output gauge falls 0.5 percent in February from January
  • Year-over-year increase at 1.3 percent, more than forecast

German industrial production declined less than forecast in February as flagging global trade forced factories in Europe’s largest economy to curb output despite strong domestic demand.

Production, adjusted for seasonal swings, fell 0.5 percent from the prior month after advancing a revised 2.3 percent in January, data from the Economy Ministry in Berlin showed on Wednesday. The reading, which is typically volatile, compares with a median estimate for 1.8 percent decline in a Bloomberg survey of economists. The gauge rose 1.3 percent from a year earlier.

The report underscores challenges facing German industry as factory orders unexpectedly declined in February, and the Bundesbank has warned weakening demand from China and other emerging markets could damp growth in the second quarter. That said, corporate confidence improved last month and the jobless rate stayed at a record-low, a sign that domestic economy remains robust.

Commerzbank estimates that production may rise almost 2 percent this quarter, which could push economic growth to 0.5 percent, an acceleration from the 0.3 percent recorded in the last three months of 2015. Still, it’s assessment of the outlook remains cautious.

“We do not assume that this marks the start of lastingly stronger economic growth,” economist Ralph Solveen in Frankfurt said. “Order intake in the past months argues against the manufacturing sector sustaining over the long term its high production levels from the first two months of this year.”

Data on Tuesday showed that factory orders fell 1.2 percent in February from previous month, reflecting sluggish growth in the global economy.

According to the production report, construction rose 1.3 percent from January while intermediate goods climbed 0.1 percent. Investment goods declined 1 percent, as did consumer goods. Manufacturing fell 0.5 percent. Energy dropped 1.8 percent.

Before it's here, it's on the Bloomberg Terminal.