April 5, 2012 / 11:39 AM / 8 years ago

Sudden cold snap hit German industry output in February

BERLIN (Reuters) - German industrial output fell more than expected in February due to unusually cold weather, Economy Ministry data showed on Thursday, tempering hopes that Germany will avoid a recession and clouding optimistic growth forecasts for the year ahead.

Production in Europe’s largest economy fell 1.3 percent in February, reversing an increase of 1.2 percent in January as sub-zero temperatures that swept across Europe last month stalled output in the construction industry.

The contraction was much sharper than the 0.5 percent decrease forecast in a Reuters poll, while January’s gain was revised down from an initial 1.6 percent estimate.

“The data is disappointing,” said Juergen Michels at Citigroup. “The reason behind it is mainly the winter weather, which crippled construction. The industry is feeling the restrained demand that slackened off back in the last half of 2011.”

Construction fell by a whopping 17.1 percent in February.

Germany’s export-driven economy shrank by 0.2 percent in the final quarter of 2011 on feeble exports and private consumption but many economists forecast it to remain stable in the first three months of 2012 and thus avoid the two successive quarters of contraction that define a recession.

However, data including purchasing manager surveys pointing to contraction in the manufacturing sector in March have raised doubts about the resilience of Germany to the euro zone crisis.

Manufacturing production dipped slightly by 0.4 percent on weak new orders.

Some institutes now predict the German economy will grow sluggishly this year at 0.3 percent, and only slightly improve on this figure in 2013 with 0.7 percent, as austerity measures in the debt-stricken euro zone weigh on foreign demand.

“The German economy could shrink again in the first quarter. But after that it should turn upwards, as indicated by forward looking indicators like the Ifo index,” Michels said.

Sentiment surveys have remained a bright spot in the Germany economy, with consumer confidence close to a year high in March and the Ifo business sentiment brightening for the fifth month running.

German companies have reported good sales in the first quarter of 2012. BMW (BMWG.DE) said it sold ten percent more cars in the first three months of 2012 than a year earlier, boosted by demand from the United States and China.

Daimler (DAIGn.DE), the world’s biggest truck maker, said on Wednesday its truck sales were up by 20 percent in the first quarter.

Reporting by Alice Baghdjian; Editing by Ruth Pitchford

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