The eurozone's fledgling recovery should accelerate in the course of the year, with economic growth reaching 2 per cent in the second quarter, according to a leading indicator produced for the Financial Times, FT Deutschland and Les Echos.

But the positive outlook, largely in line with a spate of recent confidence surveys, appeared to be contradicted by the latest figures on German industrial orders.

They showed a drop of 1.0 per cent month on month in February, confounding economists' expectations of a rise and fuelling fears that the recovery in Europe's biggest economy would be slow.

The monthly FT/FTD indicator, produced by a consortium of leading European research institutes, suggests economic growth rebounded strongly in the first quarter, rising at an annual rate of 1.4 per cent against a revised 0.85 per cent in the final three months of last year.

The consortium says the rebound was helped by an improvement in business confidence on both sides of the Atlantic and the fading impact of earlier interest rate and oil price rises.

It says the indicator points to second-quarter growth rising at a more subdued rate to 2 per cent. But it suggests "the positive tendencies should continue", putting the eurozone "on a course leading to an annual average growth of about 3 per cent".

However, DIW, the German institute that helped compile the indicator, said the pace of economic expansion in the first quarter had been over-estimated.

It said it expected "major corrections" to gross domestic product estimates for the fourth quarter of last year and warned that higher oil prices, which rose sharply last week amid escalating Middle East violence, would also dent confidence and moderate growth.

Last week, Wim Duisenberg, the European Central Bank president, warned that higher oil prices could push eurozone inflation higher than expected. That would erode purchasing power and hit consumption.

Economists said the latest industrial order figures pointed to hesitant economic growth in the first half and placed "a question mark" over the signals being given by some indicators.

"The figures are a bit disappointing. . . but they are a sign that the economic recovery will be slower than people thought and won't take hold until the second half of this year," said Rainer Guntermann of Dresdner Kleinwort Wasserstein.

The German finance ministry said the decline in orders was largely due to a fall in orders for big-ticket items and emphasised that the figures were preliminary.

Capital goods orders were down 4 per cent on January. Orders for intermediate goods rose 3.5 per cent, with export orders for such items climbing 8.6 per cent. Total domestic orders fell 2.1 per cent on the month.

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