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Euro zone production jumps more than expected as economy powers on

This file photo taken on Jan. 26, 2018 shows employees working on a Porsche on the assembly line in Stuttgart, southwestern Germany.

THOMAS KIENZLE/AFP/Getty Images

Euro zone industrial production jumped more than expected in December, data from the EU statistics office Eurostat showed on Wednesday, underlining the fastest economic growth rate in a decade that economists expect to continue in 2018.

Eurostat said industrial production in the 19 countries sharing the euro rose 0.4 per cent month-on-month for a 5.2 per cent year-on-year gain. Economists polled by Reuters had expected a 0.2 per cent monthly and 4.2 per cent annual rise.

"The acceleration of production growth is unlikely to be a one-off as the outlook for industry remains rosy," said Bert Colijn, senior euro zone economist at ING bank.

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"Given the current backlog of work in industry, it is no surprise that hiring and investment in capital goods are high on the list of businesses. This adds to the strong economic picture for the start of 2018," he said.

The statistics office also confirmed its earlier preliminary estimate of gross domestic product growth in the euro zone in the last three months of 2017 at 0.6 per cent quarter-on-quarter and 2.7 per cent against the same period of 2016.

Overall in 2017, euro zone GDP rose 2.5 per cent, Eurostat said, the fastest growth rate since a 3.0 per cent rise in 2007.

"Looking ahead, surveys suggest that the region's upturn will gather pace," said Stephen Brown, European economist at Capital Economics. "We expect the euro zone's upturn to match last year's strong pace in 2018, with annual GDP growth of 2.5 per cent."

UPSWING SEEN CONTINUING

The GDP of Germany, the euro zone's biggest economy, grew 0.6 per cent on the quarter and 2.9 per cent year-on-year in the fourth quarter, with France at 0.6 per cent and 2.4 per cent respectively and Spain at 0.7 and 3.1 per cent respectively.

"For the year 2018 as a whole, a strong increase of 2.5 per cent is still likely, even if the statisticians have slightly revised previous data downwards," Joerg Kraemer, chief economist at Commerzbank, said in a note on Germany.

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"We continue to believe that the upswing could continue for another two or three years despite the roll-back of labor market reforms because cyclical tensions on the labor market are not yet in sight," he said.

Eurostat also revised upwards November production figures to 1.3 per cent month-on-month from 1.0 per cent and to 3.7 per cent year-on-year from 3.2 per cent.

The production surge was fueled by durable consumer goods such as refrigerators and TV sets, the output of which jumped 2.7 per cent on the month in December and was 7.4 per cent higher than a year earlier.

The output of intermediate goods – like parts for their production – jumped 1.4 per cent for a 6.6 per cent annual gain.

The production of capital goods rose 7.6 per cent year-on-year in December, accelerating from 6.7 per cent in the previous month, indicating that investment was picking up too.

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