Euro zone Oct industrial output up less than forecast

Tue Dec 14, 2010 5:01am EST

* Industrial output up 0.7 pct m/m, 6.9 pct y/y

* Figures consistent with slowing growth forecast

* Production boosted by capital goods, Germany figure

By Marcin Grajewski

BRUSSELS, Dec 14 (Reuters) - Euro zone industrial production increased less than expected in October, data showed on Tuesday, chiming with forecasts of slower growth in the fourth quarter as the currency area struggles to ward off a debt crisis.

European Union statistics office Eurostat said that industrial output in the 16 countries using the euro rose 0.7 percent month-on-month for an annual gain of 6.9 percent.

Economists polled by Reuters had expected a monthly rise of 1.3 percent and an annual increase of 7.6 percent.

Eurostat also revised upwards the September figures to -0.7 percent from a previous reading of -0.9, and to 5.4 percent year-on-year from 5.2 percent.

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Industrial production accounts for less than 20 percent of euro zone gross domestic product, but because of its knock-on effects on other sectors it is still seen as a good proxy for estimating gross domestic product growth.

Euro zone growth slowed to 0.4 percent in the July-September period, quarter-on-quarter, from 1.0 percent in the previous three months.

It is expected to remain subdued as austerity measures ordered by many governments begin to bite and uncertainty linked to sovereign debt problems may undermine consumer spending.

Eurostat said industrial production growth was fuelled by a 1.8 percent monthly increase in capital goods, such as machinery, tools and equipment used to produce other goods, suggesting corporate investment was on the rise.

But production of durable consumer goods contracted 0.1 percent on the month, pointing to weak private demand that is key to making euro zone growth self-sustaining.

The data confirmed that euro zone growth is being powered by Germany, the area's biggest economy, where monthly production increased by 3.0 percent. Output fell by 0.6 percent in France, the euro zone's second biggest economy.

Encouragingly, production rose in crisis-hit Greece and Spain -- by 3.6 percent and 0.1 percent respectively.

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