April 7, 2014 / 12:50 PM / 4 years ago

UPDATE 2-Manufacturing helps German industry output in February

* Strong February points to firm Q1 growth

* Intermediate goods drive February increase

* Construction sector in good shape despite February decrease (Adds graphic, IW institute and BDI)

BERLIN, April 7 (Reuters) - German industrial output rose slightly more than forecast in February, driven by higher production of intermediate goods and suggesting Europe’s biggest economy could be on track for a strong first quarter.

Data from the Economy Ministry on Monday showed industrial production climbed by 0.4 percent, helped by a 0.5 percent increase in manufacturing - the part of the economy which powers Germany’s success in exporting goods around the world.

Despite drops in energy and construction, industrial output growth was one tenth of a point above the consensus forecast in a Reuters poll of 40 economists.

“Given lively order activity as well as good production figures in the first two months of the year, output should be noticeably above the final quarter of 2013 in the first quarter as a whole,” the ministry said in a statement.

Factories churned out 1.3 percent more intermediate goods - which make up part of a final product - and 0.3 percent more consumption goods than a month earlier. Production of investment goods fell by 0.2 percent.

“The latest hard data has closed the gap between buoyant confidence indicators and weak economic activity. Since the start of the year, hard economic data has accelerated,” said ING economist Carsten Brzeski.

“Looking ahead, the German economy should gain further momentum. The formula for success is still the same: the labour market remains tight, order books are filled and inventories are at a 2-1/2-year low,” he added.

Coming on the heels of strong industrial orders data on Friday, the data point to mild weather helping the economy to firm growth in the first quarter. Some economists even expect a rise of 1 percent.

February’s fall in construction activity came after three months of increases, including a 2 percent and a 4.5 percent increase in the last two months, boding well for the sector which often struggles over winter.

“The impact of the mild winter can be seen in the sharp divergence of energy output, down 1.5 percent on the quarter so far, and construction output, which jumped by 5.8 percent quarter on quarter,” said Christian Schulz of Berenberg Bank.

The economy will grow by at least 1.75 percent this year and by just under 2 percent in 2015 thanks to a pickup in the global economy, the Cologne Institute for Economic Research (IW) said on Monday. It added that the conflict between Ukraine and Russia put a big question mark over every economic forecast, however.

Last year the German economy managed growth of just 0.4 percent as exports were weak and firms held back on investment.

A survey of more than 3,000 firms by IW showed that just over half expected to increase their output this year - more than the 42 percent who said that in autumn. Manufacturers of investment goods and machines were particularly optimistic.

Only 10 percent of companies expected to produce less this year than last, the survey showed.

Ulrich Grillo, president of Germany’s BDI industry association, said on Monday it expected exports to increase by up to 5 percent but added that imports would climb even more steeply as investment picked up. He said orders data suggested capacity utilisation and production would continue to increase.

Reporting by Michelle Martin and Annika Breidthardt; Editing by John Stonestreet

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