UPDATE 1-Euro zone industry output unexpectedly falls in March as energy production slumps

Wed May 14, 2014 8:11am EDT

Related Topics

* March output down 0.3 pct m/m, falls 0.1 pct y/y
    * Energy output drops 11.9 pct y/y, biggest fall in 5 years
    * European utilities feel impact of lower electricity demand

 (Adds details, analysts)
    By Martin Santa
    BRUSSELS, May 14 (Reuters) - Euro zone industrial output
unexpectedly fell in March on the year for the first time since
August as energy production slumped, data showed on Wednesday,
in what could point to slower economic growth going into the
second quarter.
    Output in the 18 countries sharing the euro dipped 0.1
percent on the year due to the steepest drop in energy
production in nearly five years, Eurostat said. Weak energy
output was partly due to a mild winter.
    Analysts polled by Reuters had expected a 1 percent rise in
industrial production, with none of them predicting an annual
drop. Production also fell 0.3 percent from February.
    The figures added to some recent softer euro zone data
including  a sharp drop in the ZEW German investor morale index
in April, which could suggest growth in the currency bloc
continues to struggle to gain stronger momentum.
    "(Industrial output) rose 0.2 percent in the first quarter
over the last quarter of 2013, which implies that the euro
economy should have also continued to expand at the start of the
year. That said, somewhat weaker growth looks likely in the
second quarter," said Christoph Weil, economist at Commerzbank.
    The European Central Bank is preparing some stimulus for the
euro zone economy, including potential interest rate cuts and
measures to boost lending to small and mid-sized firms and is
set to announce them at its June policy meeting, sources
familiar with the matter told Reuters. 
    Economists expect euro zone economic growth will still
accelerate to around 0.4 percent quarter-on-quarter in the first
three months of the year, from 0.3 percent in the final quarter
of 2013, but slow to around 0.2 percent in April-June.
    An estimate of first-quarter GDP is due on Thursday. If in
line with expectations, it would be the strongest rise in three
years.
    
    UTILITIES FEEL THE PINCH
    Energy production slumped 11.9 percent in March
year-on-year, dropping for the fourth consecutive month and the
biggest annual drop since April 2009, Eurostat, the EU's
statistics office, said. 
    The fall offset a 2.6 percent rise in the production of
capital goods and a 2.2 percent increase in the output of
intermediate goods.
    European energy utilities are already feeling the pinch of
lower wholesale electricity prices.
    Those prices have more than halved in the five years since
the global economic crisis because of weak demand, exacerbated
by a mild winter, and a rise in the use of renewable energy
sources that are given priority access to power grids over
conventional gas and coal-fired power plants.
    Germany's second-biggest utility RWE said on
Wednesday that its first-quarter operating profit fell almost a
fifth and central Europe's largest listed utility CEZ 
reported on Tuesday a 44 percent drop in first-quarter net
profit.
    "This slowdown is totally accounted for by very weak 
production of energy goods, down 4 percent quarter-on-quarter on
the back of the unusually warm weather conditions prevailing
over the winter," said Marco Valli, chief euro zone economist at
UniCredit.               
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for March TABLE pls see:        
for graphics pls see:    link.reuters.com/heg44s
for more details pls see: here
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 (Editing by Susan Fenton)
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