Eurozone industrial output in surprise August jump

October 12, 2011 - 5:45 AM

LONDON (AP) — Industrial production in the 17 euro countries unexpectedly rose during August, official figures showed Wednesday, easing concerns that the crisis-torn eurozone was heading back into recession in the third quarter.

Eurostat, the EU's statistics office, said industrial output in the eurozone increased by 1.2 percent in August from the previous month, in contrast to expectations for a 0.8 percent decline.

August's increase comes hot on the heels of July's 1.1 percent rise and shows the industrial sector buoyant despite the wider slowdown in the global economy and the debt crisis afflicting the single currency bloc.

"August's rise suggests that, for now at least, the sector is continuing to prop up the wider recovery," said Ben May, European economist at Capital Economics.

May said the figures for July and August indicate that the industrial sector may be on course to expand by more than 1 percent in the third quarter from the previous three-month period, when it grew by only 0.5 percent.

Since the industrial sector is crucially important for some eurozone economies, notably Germany, the figures also indicate that the wider eurozone economy will not slide into recession as had been feared. In the second quarter, the eurozone growth rate slowed down to 0.2 percent from 0.8 percent in the first quarter.

Despite the better than expected industrial figures, analysts think the eurozone economy will continue to fall short of its potential for a while yet, not least because many of the currency's users are enacting big austerity programs to get a handle on their debts.

And with leaders still to offer a comprehensive solution to the crisis that has afflicted the currency zone for about two years, confidence remains fragile. That uncertainty has caused a slowdown in the global economic recovery, triggered turmoil in financial markets and weakened household spending in the eurozone.