UPDATE 2-Euro zone industrial output drops sharply in October

Thu Dec 12, 2013 7:23am EST

Related Topics

* Output falls 1.1 pct month on month, worst since Sept 2012

* Slump led by falling production of energy, durable goods

* Analysts had last week forecast 0.3 percent rise

* European Commission says confident economic recovery under way

By Martin Santa

BRUSSELS, Dec 12 (Reuters) - Euro zone industrial output fell at its steepest monthly rate in more than a year in October, highlighting the fragility of the bloc's economic recovery and supporting the case for further central bank stimulus.

The 9.5 trillion euro ($13.1 trillion) regional economy emerged from recession in the second quarter but growth almost ground to a halt again in the third, and the outlook is clouded by record high unemployment, and weak consumer and business confidence.

Industrial production in the 17 countries using the single currency dropped 1.1 percent on the month, its biggest monthly decline since September 2012, Thursday's data from EU statistics agency Eurostat showed.

Analysts polled last week by Reuters had expected a 0.3 percent rise after a revised 0.2 percent drop in September. Data showing a 1.2 percent drop in industrial output in the region's dominant economy Germany was released on Monday.

"All in all, today's industrial production figures clearly highlight the bumpy and fragile nature of the euro zone's economic recovery," said Martin van Vliet, an economist at ING.

"With euro zone growth seemingly stuck in low gear disinflationary pressures will persist, thereby keeping the possibility of further ECB action very much alive."

The European Central Bank cut interest rates to a record low of 0.25 percent in November in reaction a sharp fall in inflation and the weak recovery, with the bank saying it stood ready for further action to shield the rebound and keep inflation on projected path.

A spokeswoman for the EU executive, the European Commission, said a variety of indicators needed to be taken into account when assessing the state of the economy, which it remained confident was at "(the) beginning of a solid recovery".

Year on year, output rose 0.2 percent in October.

IRISH OUTPUT TUMBLES

The monthly production fall was led by a 4.0 percent drop in highly volatile energy output, followed by a 2.4 percent decline in production of durable goods including cars and electronics. Capital goods production fell 1.3 percent.

European refinery output in October dropped 6 percent on the year and was down by 7.9 percent on the month as refiners traditionally conduct routine maintenance in the third quarter, and weak profit margins pushed many to cut crude processing rates for economic reasons this year as well.

Output in the euro zone's second biggest economy France dropped by 0.3 percent on the month for a second consecutive month.

Ireland, which is exiting an international financial bailout, saw production plummet 11.6 percent on the month, the worst performance since September last year.

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