Increase in Industrial Production across Europe
A larger than expected increase in industrial production across the 17 European Union countries that use the euro has raised hopes that the recession in the currency bloc has eased or even ended.
Official figures today from Eurostat, the EU’s statistics office, showed euro zone industrial output rose a monthly 1% in March.
That was double the rate expected in the markets and the biggest gain since July 2011.
As a result, industrial production during the first quarter was up a quarterly 0.2%. This will provide an advantage to euro zone economic growth figures – the first estimate for the first-quarter is due tomorrow.
The consensus in the markets before the industrial production figures for March were released was for euro zone GDP to have fallen a modest 0.1%, far less than the previous quarter’s 0.6% decline.
But the overall figure masks a huge divergence in economic performance across the euro zone, with many countries, such as Greece and Spain, still in recession. The euro zone as a whole has been in recession – officially defined as two quarters of economic contraction in a row – since the end of 2011.
Even if tomorrow’s figures from Eurostat show a flat reading, or a rise, few economists predict a marked upswing over the remainder of the year.
Forward-looking economic surveys of investors and business managers have registered little improvement in spending and investment intentions, while unemployment remains around a record high of 12%. Hopes would be that the increase in Industrial Production would lead to increase in new jobs accross Europe
The European Central Bank’s decision earlier this month to cut its benchmark interest rate to a record low of 0.5% was also predicated on a grim assessment of the economic outlook.
Many countries in the euro zone are seeing their economies shrink as their governments enact often tough budget austerity measures to get a handle on their debts. Cuts to pay and pensions and public sector redundancies have been hurting near-term economic growth. Meanwhile, reforms that make the economy more competitive will take longer to yield benefit.