Euro Zone Industry Stumbles In December, But Recovery Still Seen On Track

Euro zone industrial output fell more than expected in December, data showed on Wednesday, but probably not by enough to have stopped economic growth from picking up slightly in the last three months of the year.

Industrial output in the 17 countries sharing the euro in December fell 0.7 percent on the month, after a downwardly revised 1.6 percent rise in November, Eurostat, the European Union statistics agency, said. Analysts polled by Reuters expected only a 0.3 percent fall in December.

But economists said that on average in the last three months of 2013 euro zone industrial production was 0.3 percent higher quarter-on-quarter than in the previous three months.

This meant that euro zone gross domestic product growth – to be reported in an initial reading on Friday – was likely to have picked up to 0.2 percent quarter-on-quarter from 0.1 percent in the previous three months.

“Today’s disappointing industrial production has no impact on our euro zone growth forecasts,” said Marco Valli, chief euro zone economist at UniCredit, who forecast 0.2 percent quarterly growth in fourth quarter euro zone GDP.

The production decrease was driven mainly by a 2.1 percent fall in output of energy and capital goods, with production of non-durable consumer goods down 0.1 percent against November.

“Some of the weakness was probably due to the soft winter weather, pushing down energy production by 2.1 percent,” said Peter Vanden Houte, an analyst with ING.

The growth weakness was likely to add to arguments for the European Central Bank to loosen monetary policy further next month, given inflation, at 0.8 percent year-on-year in January, was well below its target of below-but-close-to 2 percent.

“Despite much better sentiment, economic growth in the euro area in autumn was thus probably only slightly stronger than in summer. This supports our expectation that the ECB will take further expansionary measures, probably as early as March,” said Christoph Weil, economist at Commerzbank.

Compared with the same period of last year, industrial production rose 0.5 percent in December after a downwardly revised 2.8 percent rise in November. But analysts had expected a 1.8 percent expansion year-on-year.

Only three out of 17 countries sharing the euro saw industrial production rising in December, led by a 2.7 percent growth on the month in Slovenia and a 2.6 percent jump in Greece.

Portugal, which is expected to exit from an international bailout later this year, saw production rising 0.7 percent compared to November.

Industrial production in Europe’s strongest economy Germany fell 0.7 percent on the month, while second largest France was down 0.3 percent and the third biggest Italy fell 0.9 percent month on month.

Source : Reuters