German industrial production surged in the first quarter

Industrial output in Germany dropped sharply in March, weighed down by falls in the production of capital, intermediate goods as well as activity in the construction sector.

Production declined by 1.3% over the month, according to the Ministry of Finance, dragging the year-on-year rate of growth from 2.0% to 0.3%.

Economists had pencilled in a dip of 0.2%.

The fall in construction output was particularly noteworthy, dropping by 3.2% month-on-month, albeit after strong gains over the course of the previous two months.

Excluding construction industrial production was down by 1.0%.

"Overall, though, the downbeat headline is not enough to change the story of rising production in Q1 as a whole," Pantheon Macroeconomics said in a research note sent to clients.

The revised index indicated that output jumped 1.8% quarter-on-quarter in the first three months of the year, rebounding from a 0.3% fall in the last quarter of 2015.

"This points to a strong GDP print later this week, and suggests that the consensus’ prediction of an upbeat 0.6% quarter-on-quarter is within reach."