Euro Zone Industrial Output Increased Less Than Expected

Industrial production in the EU’s 17 countries sharing the euro increased in January for the first time since October.

According to Eurostat, industrial production in January was up 0.2% from December, but 1.2% lower than in January 2011. The figures were weaker than expected. The forecast was that output would rise by 0.5% on the month, and would decrease by 0.7% on the year.

An increase in industrial output was driven by the energy sector, which increased its output by 1.4% from December, while production of non-durable consumer goods fell by 0.7%. That combination puts in question sustainability of the growing output, since energy output typically rises in the cold early months of the year, and the decline in non-durable consumer goods indicates manufacturers expect domestic demand to be weak.

Consumer prices increased by 0.5% from January. Annual inflation was 2.7% in February 2012, unchanged compared with January. A year earlier the rate was 2.4%. The annual rate of inflation remained well above the ECB’s target of slightly below 2.0%, and that will concern policy makers, particularly given the recent rise in oil prices.

The pickup in industrial production confirms expectations that if the euro zone is to enter a recession, it will be mild, at least in its initial stages. The euro zone economy contracted in the final quarter of 2011, the expectations are that it will contract this quarter too, which technically would amount to a recession.

Source: Wall Street Journal

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