* March output +2.8 pct vs Feb output -0.3 pct * Reuters forecast for +0.8 pct in Mar By Alice Baghdjian BERLIN, May 8 (Reuters) - German industry output shot up far more than expected in March after a weak winter, lifting hopes Europe's biggest economy will gather steam this year and highlighting its economic divergence with much of the rest of the euro zone. Production in Germany jumped 2.8 percent in March seasonally adjusted from the previous month, Economy Ministry data showed on Tuesday, recovering from a revised 0.3 percent decline in February. The figures were well above the consensus forecast in a Reuters poll for a 0.8 percent rise, and overshot the highest forecast of a 2.4 percent increase. "Hibernation has ended," said Carsten Brzeski at ING Bank. "While almost all other euro zone countries are currently caught in the downward spiral of austerity measures, deleveraging and economic reforms, the German economy is still enjoying the results of earlier structural reforms," he said. The jump in output followed a steep rise in industrial orders in March, which rose on the back of demand from outside the ailing euro zone. The data also countered a string of disappointing German economic data recently that has questioned the export-driven economy's resilience to the euro zone's debt troubles although risks to Germany's outlook from the euro zone's problems remain. "March's sharp rise in German industrial production reduces the risk that the economy is already in recession," said Jennifer McKeown at Capital Economics. Germany's economy has powered ahead of its peers after recovering swiftly from the 2008/09 financial crisis and has consistently brushed off the debt worries plaguing peripheral euro zone countries. The German economy slipped up only in the final quarter of last year, contracting by 0.2 percent, as economic woes in the currency bloc stifled demand and weakened private consumption at home. However, economists now say this was a glitch, and Germany's eight leading economic institutes have revised their 2012 growth estimates upwards to 0.9 percent. The government has stuck to its forecast of 0.7 percent growth for this year. Wolfgang Franz, head of a panel of German government economic advisers known as the "wise men", told Reuters separately on Tuesday that indicators suggested Germany might skirt recession but that it would be touch and go. "First quarter figures could swing on either side of zero, perhaps slightly below, perhaps slightly above," said Franz. RELIANCE ON ASIA Germany is not immune to the euro zone's problems though and its high-end exports within the currency bloc have shown signs of wobbling, as austerity measures, high unemployment and weak growth begin to take their toll on orders. The German manufacturing sector contracted at the fastest pace since 2009 last month on the back of flagging demand and German companies are showing growing reliance on orders from outside the euro zone and in the domestic market. Car sales to China have been gaining traction and German luxury names account for nearly 80 percent of the premium car market there, figures from PricewaterhouseCoopers show. German luxury carmakers BMW and Porsche reported record first-quarter profits as Chinese demand for sporty sedans and SUVs surged, underscoring their growing dependence on Asian markets. German business sentiment rose for the sixth month in a row in April, defying forecasts for it to fall. But consumer confidence inched down heading into May, and retail sales, a notoriously volatile indicator have fallen for four out of the last six months, tempering hopes that private consumption will help the economy through any weak phase. "It would be premature to believe that the German economy can maintain strong growth rates when the rest of the euro zone is faltering," said ING's Brzeski.