(Adds detail, economist comment, context)
By Michelle Martin
BERLIN, March 7 German industry output rose for a third consecutive month in January, driven by a surge in construction, data showed on Friday, suggesting the industrial sector in Europe's largest economy started 2014 in good shape.
Industry production climbed by 0.8 percent, data from the Economy Ministry showed. That beat the consensus forecast in a Reuters poll of economists for a 0.7 percent rise and came after data for December was revised up to an increase of 0.1 percent.
Coming on the heels of figures showing a 1.2 percent increase in January orders, the output data paints a rosy picture of the real economy and suggests the dichotomy between hard and soft data which economists had flagged as a worry may be dissolving.
"This conundrum that we thought we would have last quarter of strong confidence indicators and weak economic activity has been solved more or less by itself by data revisions," said ING economist Carsten Brzeski.
"If we add retail sales, yesterday's new orders, the mild winter weather, I think we will get another strong quarter for the German economy," he said, predicting 0.5 percent growth on the quarter for the January to March period.
Recent sentiment surveys have shown consumer and business morale brightening while investor morale is also high, pointing to an economic upturn in early 2014. Originally-reported data for December had shown exports, orders and output falling.
The Economy Ministry said a 4.4 percent increase in construction was likely due to the mild winter and added that industrial production was on a clear upward trend at the beginning of the year.
Factories churned out slightly more capital and intermediate goods but they made fewer consumer goods. Energy output was up.
Data for Germany's industrial sector is choppy from month to month but a less volatile comparison of the December-January period with the previous two months still showed output was up by 1.7 percent.
Some companies in the sector have expressed optimism in recent weeks. BASF, the world's largest chemicals company by sales, has predicted a small rise in operating profit this year and steel distributor Kloeckner & Co said it was on track to return to profit this year.
(Reporting by Michelle Martin; Editing by Noah Barkin and Stephen Brown)