German industry output rises in February before likely collapse due to corona

BERLIN (Reuters) - German industry output rose by 0.3% in February, beating expectations, but the figures reflect the period before the coronavirus significantly affected Europe's largest economy and the Economy Ministry warned of an impending collapse.

With factories, shops and other businesses mostly shut for weeks to help slow the spread of the coronavirus, most economists expect the German economy to shrink this year.

Figures released by the Statistics Office on Tuesday showed a 1.8% increase in the production of German consumer goods but a 0.3% decline in capital goods. A Reuters poll had put expectations for the overall figure at a 0.9% drop.

The Economy Ministry gave a bleak outlook, saying the coronavirus outbreak had brought to an "abrupt stop" a recovery in the industrial economy that had just started after a 2-year long weak phase.

"Industry production will see a major collapse from March and for the second quarter on average," said the ministry.

The Ifo institute said earlier that industrial output in Germany would probably tumble in the coming three months, adding that its index for production expectations had seen its biggest fall since the survey was first conducted in 1991.

That index dropped to -20.8 points in March from 2.0 and Ifo economist Klaus Wohlrabe said: "We are assuming that this development is still somewhat underestimated, as most of the answers were received by mid-March."

Data released on Monday showed that orders for German-made goods dropped 1.4% in February and a sharp fall in demand from abroad pointed to the likely impact of the coronavirus on the exporting powerhouse's economic prospects.

The Economy Ministry said on Monday it expected major falls in orders for March and April and sharp drops in production in the first and second quarters.

The BDI industry association said on Monday it saw the economy contracting by 3-6% this year if economic activity was disrupted for a maximum of six weeks.

The January output reading was revised to an increase of 3.2% from a previously reported 3.0% rise.

(Reporting by Madeline Chambers; Editing by Michelle Martin)