Eurozone industrial output falls sharply

Among major economies, EU powerhouse Germany fell 1.2% after downturn of 0.7%, with France off 0.3%.

BRUSSELS: Eurozone industrial output fell sharply in October, stoking concerns a fragile recovery from a record recession could be stalling, official data showed on Thursday.

Industrial output in the 17-nation eurozone slumped 1.1 per cent in October compared with September when it fell a revised 0.2 per cent, the Eurostat statistics agency said.

In the full 28-member European Union, industrial production dropped 0.7 per cent after a marginal gain of 0.1 per cent in September, Eurostat said.

Several analysts said the figures were worrying, especially after economic growth slowed sharply in the third quarter.

"October’s marked drop in industrial production indicates that the eurozone is struggling to regain even modest economic momentum," said Howard Archer of IHS Global Insight.

Industrial output figures can be volatile but as well as the large drop, October was also the second consecutive monthly downturn.

That is of particular concern since the eurozone escaped a record 18-month recession in the second quarter with growth of 0.3 per cent only for this to slow to a marginal 0.1 per cent in the third.

Archer said the European Central Bank would likely have to take further stimulus measures soon, having recently cut its benchmark interest rate to a record low 0.25 per cent in an effort to boost activity.

"It is possible that the ECB will eventually go down the negative deposit interest rate route," even it would prefer not to, he said.

Negative rates on deposits with the ECB would be a radical step meant to push the commercial banks to lend their money out rather than in effect pay for the ECB to hold it.

While the ECB and national authorities have pumped massive amounts of cheap month into the financial markets, the banks have largely focused on rebuilding their capital base rather than take on risk.

The ECB is likely to hold interest rates at 0.25 per cent through to 2015 but "could trim it to 0.1 per cent or even zero," depending on circumstances, Archer said.

Among the major economies, EU powerhouse Germany fell 1.2 per cent after a downturn of 0.7 per cent, with France off 0.3 per cent, the same as in September.

Non-euro Britain was up 0.4 per cent, slowing too after a gain of 0.9 per cent in September.

Compared with October 2012, eurozone industrial output, a broad measure of manufacturing activity, was up 0.2 per cent while the EU gained 0.8 per cent.

Capital Economics analyst Ben May said the data "paint a pretty downbeat picture and suggest that the industrial sector cannot be relied on to drive a wider euro-one economic recovery."

The separate country figures "also painted a pretty bleak picture," May said, citing Germany, France and Spain which all fell 0.8 per cent.

Other analysts said the report might not be as bad as the headline figures suggest.

Tom Rogers, a senior economic adviser to Ernst and Young Eurozone Forecast, said that while the data look disappointing, it "would seem largely to reflect a reaction to the stock building that took place in the third quarter.

"As such, while the numbers do underline the relative fragility of the eurozone recovery, they shouldn’t provide too much ground for pessimism over a relapse into recession in the final quarter of the year," Rogers said.

In what could also be seen as a move to mitigate the effects of the industrial downturn, the European Parliament on Thursday granted GSP Plus status to 10 countries, including Pakistan, approving duty free access to European markets.