Euro zone factory output shows surprisingly big fall in January

BRUSSELS Wed Mar 13, 2013 6:04am EDT

A worker stands in front of a rolling mill in the ArcelorMittal steel factory in Eisenhuettenstadt, 124 km (77 miles) east of Berlin November 26, 2012. REUTERS/Thomas Peter

A worker stands in front of a rolling mill in the ArcelorMittal steel factory in Eisenhuettenstadt, 124 km (77 miles) east of Berlin November 26, 2012.

Credit: Reuters/Thomas Peter

BRUSSELS (Reuters) - Output at euro zone factories fell more than expected at the start of 2013 and production in France and Germany slipped in the latest sign the bloc is struggling to emerge from recession.

Industrial production in the 17 countries sharing the euro fell 0.4 percent in January from December, the EU's statistics office Eurostat said on Wednesday. Economists polled by Reuters had forecast a 0.1 percent fall.

Factory output, two-thirds of which is generated by Germany, France and Italy, was also down 1.3 percent on an annual basis in January, showing just how few cars, televisions and other manufactured goods like fridges Europeans are buying at a time of record unemployment.

The poor state of manufacturing is a reminder to euro zone heads of state meeting for a summit in Brussels on Thursday evening of how far the bloc has to go to build a recovery after three years of a devastating public debt crisis.

Production of machinery used to make other goods, an indicator of future business, fell 1.2 percent in January from the previous month and output of durable consumer goods, such as cars and furniture, fell 1.4 percent in the same period.

Germany and France, the euro zone's two biggest economies, both recorded a contraction in manufacturing, while data for Italy was not provided by Eurostat.

The euro zone reading may provide the European Central Bank with more of an incentive to consider cutting interest rates to below the current 0.75 percent rate later this year to lower the cost of borrowing for companies and households.

"The ECB is reluctant to use the remaining room to maneuver. Cuts in the main policy rate are being kept for an even rainier day," David Mackie, an economist at JP Morgan, wrote in a research note. "We believe that the ECB should respond to this macro outlook," he said.

(Reporting by Robin Emmott; editing by Rex Merrifield)