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A worker fixes a teapot in an Italian factory. (STEFANO RELLANDINI/REUTERS)
A worker fixes a teapot in an Italian factory. (STEFANO RELLANDINI/REUTERS)

Euro zone’s strong factory output surprises in August Add to ...

Output at euro zone factories grew much more than expected in August, helped by summer demand for food and French car production, but industry’s apparent resilience is unlikely to be enough to avoid a recession in the indebted region this year.

Industrial production in the 17 countries sharing the euro rose 0.6 per cent in August from July, the EU’s statistics office Eurostat said on Friday, beating expectations of a 0.4 per cent fall forecast by economists in a Reuters poll.

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That was lifted by a strong showing in France and Italy, which along with Germany make up around two thirds of the euro zone’s industrial output.

Production of durable consumer goods such as cars and televisions jumped almost 4 per cent in August, while non-durable goods output – drinks and processed food – rose 1.3 per cent.

But industrial production in August is notoriously volatile as factories slow output or close altogether during the European summer holiday, meaning investors will be looking to figures from September onwards to get a real sense of the economy.

The International Monetary Fund forecasts a deeper-than-expected contraction of 0.4 per cent in the euro zone this year as record unemployment, stubborn inflation and government austerity force households and businesses to drastically cut back. Despite hopes for a recovery next year, the IMF sees growth of just 0.2 per cent in 2013.

That sober outlook was underscored by industrial production data on an annual basis, which fell 2.9 per cent in August, the biggest drop in at least six months.

With governments cutting everything from pensions to defence spending across Europe to bring down their debts and deficits, Germany and France – the euro zone’s two largest economies – are finding it harder to find buyers for their products.

German industry output fell 1.6 per cent in August on an annual basis and in Italy, there was a drop of 5.2 per cent.

As the three-year euro zone crisis impacts business confidence across the world, the World Bank has also warned of a worsening slowdown in China, a major importer of European goods.

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