German industrial production continued to fall in February, but at a slower pace than January, data released by the Federal Ministry of Economics and Technology showed Thursday.

Industrial output fell 2.9% month-on-month in February after falling revised 6.1% in January and stretching the downward trend for the sixth consecutive month. Meanwhile, economists had expected a decline of 3%. The ministry revised January's figure from a 7.5% fall initially reported.

On an annual basis, calendar-adjusted output plummeted 20.6% in February following a revised 17.9% decline in January, while the consensus forecast was for a 21.7% fall. On an unadjusted basis, output dropped 23.2% year-on-year after a 21.4% drop in January.

Calling the monthly decline in industrial production less drastic than before, Commerzbank analyst Simon Junker said, Previously declining order intakes, however, indicate further reductions in production in the months ahead.

A day earlier, the ministry has reported that orders to German manufacturing firms fell 3.5% month-on-month in February after falling 6.7% in January. That was the sixth straight month of decline in order intakes.

On an annual basis, orders plunged 38.2% in February following 36.8% drop in January, while the consensus forecast was for a 36.5% decline. It was the tenth consecutive month of decline in orders.

Since less order today imply less production tomorrow, the situation in manufacturing is set to remain gloomy, Junker said.

Based on the order figures, the Commerzbank forecast industrial production to fall around 2% in March, and production to remain on its downtrend in the second quarter. This supports the bank's forecast that the German economy shrunk 3.5% in the first quarter- and thus at an even higher speed than in the final quarter 2008.

With the bad prospects in manufacturing indicating a minus in economic growth even for Q2, the German economy will most likely not stabilize markedly until the end of the year, Junker said.

Also on Thursday, Germany's Federal Statistical Office confirmed inflation in March at 0.5%, down from 1% in February. That was the lowest inflation since July 1999. Compared with February, the CPI dropped 0.1% in March.

The harmonized index of consumer prices, or HICP, grew 0.4% annually in March, after rising 1% in February. On a monthly basis, the HICP was down 0.2%.

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