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EU flags fly at the European Commission headquarters in Brussels, Monday, May 9, 2011. (Yves Logghe/AP)
EU flags fly at the European Commission headquarters in Brussels, Monday, May 9, 2011. (Yves Logghe/AP)

Euro zone industrial production falls less than expected Add to ...

Euro zone industrial production fell less than expected in April and March but the shrinking output is still likely to translate into a quarterly fall in the currency bloc’s gross domestic product in April-June.

Data from the European Union’s statistics office Eurostat showed industrial production in the 17 countries sharing the euro fell 0.8 per cent month-on-month in April for a 2.3-per-cent year-on-year fall.

Economists polled by Reuters had expected a 1-per-cent monthly drop and a 2.7-per-cent annual decline.

“Assuming that production is flat in May and June, which looks like an optimistic assumption at this point, the quarter-on-quarter change for the second quarter would be –0.6 per cent,” BNP Paribas economist Ken Wattret said.

“This compares to –0.4 per cent in the first quarter, suggestive of a modest quarter-on-quarter fall in GDP in the second quarter following a flat outcome in the first.”

Eurostat revised upwards its data for March, saying the decline in the monthly production was 0.1 per cent, rather than 0.3 per cent, and the year-on-year fall was only 1.5 per cent, rather than the previously reported 2.2 per cent.

Industrial production is a key component of gross domestic product, which shrank 0.3 per cent quarter-on-quarter in the last three months of 2011 and was unchanged in the first quarter.

Economists said times remained tough for industrial concerns.

“It is evident that euro zone manufacturers are currently finding life difficult amid very challenging conditions,” said Howard Archer at IHS Global Insight.

“Domestic demand is being handicapped by tighter fiscal policy in many euro zone countries, still squeezed consumer purchasing power, and rising unemployment.”

Archer said manufacturers’ problems were being made worse by relatively muted global growth, which capped foreign demand for euro zone goods.

“On top of this, heightened euro zone sovereign debt problems focused on Greece and Spain are magnifying manufacturers’ difficulties by adding to uncertainty about the outlook,” Mr. Archer added.

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