Industrial production in the 17
countries sharing the euro fell 0.3 percent in March from February, the
EU's statistics office Eurostat said yesterday. Economists polled by
Reuters had expected a 0.4 percent increase in the month.
The figures
stood in contrast with German data last week showing output in the euro
zone's largest economy up 2.8 percent for the month, underlying the
division in the bloc.
Many economists expect Eurostat to show on
Tuesday that the euro zone entered its second recession in just three
years at the end of March, with households suffering the effects of
austerity programs aimed at cutting debt and deficits.
"Industrial
production is a timely reminder that first-quarter GDP will likely show a
contraction," said Martin van Vliet, an economist at ING. "With the
fiscal squeeze unlikely to ease soon and the debt crisis flaring up
again, any upturn in industrial activity later this year will likely be
modest."
European officials have repeatedly said the slump will be
mild, with a recovery in the second half of this year. But the strong
economic data seen in January has unexpectedly faded and business
surveys point to a deeper downturn, with the drag coming from a
debt-laden south, epitomized by Greece, Spain and Italy.
Economists
polled by Reuters last week estimated the euro zone economy shrank 0.2
percent in the first quarter, after shrinking 0.3 percent in the fourth
quarter of last year.
"We suspect that a further slowdown in the
service sector meant that the wider economy contracted by around 0.2
percent last quarter," said Ben May, an economist at Capital Economics
in London. "What's more, April's disappointing survey data for both the
industrial and service sectors suggest that the recession may continue
beyond the first quarter."
EU leaders will meet in Brussels on May 23
to try to map out ways the euro zone and the wider European Union can
return to growth while still cutting debts and deficits, but economists
and investors say there is little room to maneuver."In addition to
'high alert and forceful' crisis management, Europe still needs to
articulate more clearly its longer-term game plan," Erik Nielsen,
Unicredit's global chief economist, wrote in a note to clients on
Sunday.
In terms of the March output data, economists said the
performance underlines the weak demand for goods such as machinery and
consumer products, as the currency area suffers from the impact of a
two-year debt crisis that has driven unemployment to a record high.On
an annual basis, factory output sank 2.2 percent in March, the fourth
consecutive monthly slide, Eurostat said, and only Germany, Slovenia and
Slovakia were able to post growth.
The picture was similar on a
monthly basis, with foreign demand for German cars and high quality
machinery driving production. But elsewhere, output fell 9 percent in
the Netherlands, the biggest drop in the euro zone for the month.
