* Industry output +0.5 pct in Feb vs f'cast for +0.3 pct
* Economists say suggests rebound in investments
* Industry leaders say expect moderate German growth in 2013
* BDI industry group attacks opposition's policy proposals
By Sarah Marsh and Maria Sheahan
BERLIN/HANOVER, April 8 German industrial output
rose in February and industry leaders were cautiously optimistic
about growth and investment in Europe's largest economy this
year as long as there is no flare-up in the euro zone crisis.
Coming on the heels of figures showing a
stronger-than-expected rise in industrial orders in February,
Economy Ministry data on Monday showed output edging up 0.5
percent on the month. This was above the mid-range forecast in a
Reuters poll of economists for a 0.3 percent rise.
But industrial output still fell 0.2 percent in the first
two months of the year due to a downwardly revised drop in
production of 0.6 percent in January. Output last month was
originally reported unchanged.
Leaders of industry groups at a conference in the northern
city of Hanover said the economy was already rebounding after
shrinking in the fourth quarter of 2012 and would accelerate in
the second half of this year.
"We see good chances that the economy will pick up steam in
the course of the year," said Ulrich Grillo, the head of the BDI
industry lobby group, predicting growth of up to 0.8 percent.
Germany's economy, long resilient to the euro zone crisis,
slowed in 2012 and output shrank by 0.6 percent in the final
quarter. But economists expect it to avoid recession and to have
returned to weak growth in the first three months of 2013.
German growth is crucial for stimulating the economy of the
broader single currency bloc, struggling with a debt crisis and
mired in recession. The government is predicting an expansion of
just 0.4 percent this year.
Monday's data showed a rise in German production of capital
goods and energy in February outweighing a sharp drop in
construction, which was partly due to harsh winter weather.
"Production is stabilising once again after the sharp
decline at the end of last year," said Unicredit analyst
Alexander Koch. "Given that retail sales is also rising and
investments are stabilising, we expect a return to economic
growth in the first quarter."
Unicredit's Koch said the increase in orders and production
of capital goods such as machinery was especially positive news
for Germany's economy, which he sees growing 0.3 percent in the
first quarter, as it spelled out a rebound in investment.
Manufacturing output increased by 0.5 percent as a 2.4
percent rise in capital goods such as machinery outweighed
decreases in consumer and intermediate goods, the data showed.
Figures last week had shown domestic orders for capital
goods jumping 4.4 percent, which the Economy Ministry said set
the stage for a revival in investments. Industry orders rose 2.3
percent overall in February.
The BDI said a pickup in investments, which had been in
contraction for five quarters, was crucial for economic recovery
this year, while the steel lobby said the biggest risk remained
the euro zone crisis.
The problems with Cyprus had already weighed on German
business sentiment, which dropped in March, and worries over
Italy could dampen morale in the long-term, the head of the
steel lobby, Hans Juergen Kerkhoff, said.
"Without a return of confidence there will be no rebound in
capital goods and therefore also not in the outlook for the
steel industry," he said, reiterating his association's estimate
for steel output to rise miminimally to 43 million tonnes this
year, still well below levels of five years ago.
With federal elections looming in September, the BDI's Grillo
warned against some of the centre-left opposition's policy
proposals such as raising inheritance tax or introducing a
wealth tax, which he said would weigh on the industrial sector.
The VDMA and ZVEI trade bodies for the engineering sector
and the electrical goods industry said they had seen a moderate
pickup in business this year.
"New orders have picked up again, so there is an upward
trend. But it is not so dynamic that we are becoming overly
optimistic," said Ralph Wiechers, the VDMA's chief economist.
"Two percent (engineering output growth) are do-able this
year, but we will need some more tailwind from the economy, from
indicators and global markets."
Exceptionally harsh winter weather prevented Germany's
industrial sector from rebounding strongly this quarter,
economists said. Production in the construction sector dropped
2.7 percent, according to Monday's data.
"The harsh winter weather has not only affected the
construction sector but the entire industry," ING analyst
Carsten Brzeski said. "Interestingly, the German economy has
been hit much harder by the winter weather than the rest of the
euro zone. Some might consider this a meteorological-inflicted
Brzeski said this explained the divergence this year between
weak economic data and optimistic sentiment surveys. Recent
polls have shown consumer morale holding steady going into
April, and investor sentiment edging up.
Monday's output data also showed energy production jumping
in February, by 3.9 percent. Figures last week showed Germany
exported more electricity last year than it imported, dispelling
fears about possible power shortages due to its transition from
nuclear to renewable energy.