Tags: Eurozone | Industrial | Output | Rises | Less | Than | Expected

Eurozone Industrial Output Rises Less Than Expected

Wednesday, 13 Apr 2011 12:42 PM

Industrial production in the 17 euro countries rose for the fifth month running in February, official figures showed Wednesday, but the increase was half what markets expected, another sign that the economic recovery may be losing steam.

Eurostat, the EU's statistics office, said Wednesday that eurozone industrial output increased by 0.4 percent during the month, double the previous month's downwardly-revised rate but disappointing economists' predictions for a 0.8 percent gain.

Analysts said the figures provide further evidence that the industrial recovery may be losing momentum amid concerns over higher interest rates and the debt problems afflicting a number of euro countries. Last week, the European Central Bank raised its benchmark rate by a quarter of a percentage point to 1.25 percent, its first increase in nearly three years, because of concerns of rising inflation rates.

Ben May, European economist at Capital Economics, said the euro's recent strength, which has seen it push above $1.45 for the first time in 15 months, is likely to further weigh on the sector following last year's big pick up. A higher euro makes it more difficult for exporters to compete in the international marketplace.

"Given this, and the fact that tighter fiscal and monetary policy will increasingly bite as the year goes on, we still expect eurozone GDP growth to slow to a snail's pace in the second half of the year," May said.

The eurozone recovery has been heavily reliant on booming industry in Germany and February's figures provided further evidence that Europe's biggest economy is powering ahead, with industrial output there growing 1.4 percent on the month.

However, the picture is not so rosy in Europe's two bailed-out economies. Ireland saw its industrial output shrink by a massive 2.5 percent while Greece's declined by 1 percent.

Perhaps surprisingly, Portugal's industrial sector posted a solid 1.5 percent increase, even though the country spent much of the month trying to stave off a potential bailout. Despite all its firefighting measures, Portugal last week became the third euro country to request a bailout.

On a year-on-year basis, industrial output in the eurozone was up 7.3 percent in Febuary, 1 percentage point more than January's rate but below market expectations for an 8 percent increase.

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Industrial production in the 17 euro countries rose for the fifth month running in February, official figures showed Wednesday, but the increase was half what markets expected, another sign that the economic recovery may be losing steam. Eurostat, the EU's statistics...
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Wednesday, 13 Apr 2011 12:42 PM
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