Euro zone's February output suggests gradual recovery strengthening

BRUSSELS Mon Apr 14, 2014 6:31am EDT

A worker welds in a factory in Gravellona Lomellina, 45km (27 miles) southwest of Milan, June 11, 2013. REUTERS/Stefano Rellandini

A worker welds in a factory in Gravellona Lomellina, 45km (27 miles) southwest of Milan, June 11, 2013.

Credit: Reuters/Stefano Rellandini

BRUSSELS (Reuters) - Output at the euro zone's factories rose broadly in line with expectations in February, driven by production of intermediate and non-durable goods, suggesting the bloc's recovery is gradually strengthening, EU data showed on Monday.

Industrial output in 18 countries using the single currency rose 0.2 percent on the month, in line with market expectations. A revised for January was flat, according to Eurostat, the EU statistics office.

Compared with the same period last year, industrial output increased by 1.7 percent in February. That was slightly above the expectations of analysts polled by Reuters, who foresaw a 1.5 percent rise, after downwardly revised 1.6 percent growth in January.

The monthly rise was driven by 0.6 percent growth in production of intermediate goods. Output of non-durable consumer goods was up 0.5 percent, Eurostat said.

Capital goods' output in the bloc remained stable. Production of durable consumer goods fell 1.2 percent on the month and the highly volatile production of energy down by 1.7 percent.

Analysts say modest increases in industrial production supported belief that recovery of the 9.5 trillion-euro economy continues to firm gradually.

"It looks likely that industrial production saw reasonable if unspectacular growth across the euro zone in the first quarter and made a positive contribution to GDP growth, which we expect to come in around 0.4 percent quarter-on-quarter," said Howard Archer, chief European economist at HIS.

The euro zone recovery modestly accelerated to 0.3 percent growth, quarter on quarter, in the final quarter of last year. Eurostat will publish a flash estimate for first-quarter GDP growth on May 15.

The situation in the euro zone's southern countries, continued to improve in February, after they imposed austerity measures and wide-reaching structural reforms aimed at cleaning up public finances and restoring sustainable growth.

Compared with the same period of the last year, industrial production rose by 4.1 percent in Portugal, 3.2 percent in Spain and 1.4 percent in Greece, which returned to the bond market last week for the first time since 2010.

Europe's strongest economy, Germany, reported a 4 percent rise on the year in February, after a 4.1 percent jump a month earlier.

"Conditions remain far from easy for euro zone manufacturers, so they still have their work cut out to generate and sustain reasonable growth," Archer said.

The picture in Italy and France, where tens of thousands of people took part in protests in central Paris and Rome on Saturday against government economic reform plans and austerity measures, was mixed in February.

Output at factories in Italy rose 0.4 percent on the year, slowing from a 1.2 percent increase in January. France, the bloc's second-largest economy, saw industrial production down 1 percent after a 1.2 percent drop in January.

Based on the European Commission's latest forecast, the euro zone economy is expected to return to growth this year with a 1.2 percent expansion, accelerating to 1.8 percent the following year. It shrank 0.4 percent in 2013.

The European Central Bank said this month that the bloc's moderate recovery was proceeding in line with previous assessments and a positive contribution from domestic demand was growing. The ECB kept interest rates on hold at record lows in April.

The European Commission will publish its updated growth, inflation and unemployment forecasts for the European Union and the euro zone in May.

(Editing by Larry King)