My silver pickaxe got damaged. How is it possible?

I crafted my first silver pickaxe in Terraria 1.1. I did not examine its stats until some time later. The name color is grey with -14% damage.

I have no problem mining with it but killing monsters especially cave bats (which I have been doing a lot) got weaker.

Can anyone give an insight into why this happened? I am split between weapon degradation and crafting fluke.

You just got unlucky crafting it. "Damaged" is a random modifier (which decreases damage) assigned to items when they're crafted or drop from monsters. Similar negative modifiers, such as "Broken" and "Shoddy," also exist.

Apart from making a new one, there's not a whole lot you can do about it at this point in the game.

However, later on (after you've defeated your first Goblin Army), you can find and rescue the Goblin Tinkerer, who allows you to reforge weapons, tools and accessories, for a price. By then, you'll likely have a different, way better pickaxe, though.