By Maria Martinez
(Reuters) -German industrial production rose more than expected in February due to the performance of the construction industry, the federal statistics office said on Monday.
Industrial production rose by 2.1% compared to the previous month. Analysts polled by Reuters had predicted a 0.3% rise.
The second consecutive large monthly rise confirms the sector has started the year on a better note, said Franziska Palmas, senior Europe economist at Capital Economics, after the sector closed the year deeply in contraction.
"But we still expect it to struggle over the rest of 2024 on the back of weak demand and reduced competitiveness," Palmas said.
The month-on-month increase in production in industry is largely due to a 7.9% increase in production in the construction industry, while production dropped 6.5% on the month in the energy-production sector.
Manufacturing production, excluding energy and construction, was up 1.9% from January. This growth is largely attributable to a 5.7% increase in production in the automotive industry and of 4.6% in the chemical industry.
After a revision of the provisional results, production increased by 1.3% in January compared with December, instead of the initial estimate of 1.0%.
The less volatile three-month-on-three-month comparison showed that production was 0.5% lower in the period from December 2023 to February 2024 than in the previous three months.
Industrial production is still some 8% below its pre-pandemic level, ING's global head of macro Carsten Brzeski said.
"What we are currently seeing in German industry is a cyclical improvement, not a structural one," Brzeski said.
German industrial orders increased by 0.2% in February on the month, less than expected, showing that the weakness in demand in the manufacturing sector continues.
"Looking ahead, as much as Monday's industrial data is a balm for the German economic soul, this is not yet the start of a significant recovery," Brzeski said.