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Euro-Area Factory Output Unexpectedly Falls, Led by Energy

Euro-area industrial production unexpectedly declined in January as energy output dropped, underscoring the fragility of the currency bloc’s recovery from a record-long recession.

Factory output in the 18-nation euro zone slipped 0.2 percent from December, the European Union’s statistics office in Luxembourg said today. The median forecast in a Bloomberg News survey of 39 economists was for a 0.5 percent increase. From a year earlier, production rose 2.1 percent.

“The data confirms that the euro zone’s economic recovery remains slow and fragile with industrial production having declined in four out of the last five months,” said Duncan de Vries, an economist at Nibc Bank NV in The Hague, who forecast a 0.2 percent increase. “Hopefully the improved business surveys are a precursor for stronger real data, but at the same time everyone knows that we have been disappointed more than once in the past.”

While the euro-area economy has expanded for three straight quarters, the pace of growth hasn’t exceeded 0.3 percent. Unemployment remains near a record and inflation has been below the European Central Bank’s 2 percent ceiling for more than a year.

Encouraging Spending

“Looking ahead, manufacturers will be hoping that improved confidence in most euro-zone countries will encourage businesses to step up their spending on capital goods and component parts, and also encourage consumers to pick up their spending, particularly on durable goods,” said Howard Archer, an economist at IHS Global Insight in London.

The euro erased losses against the dollar after today’s report was published, trading at $1.3894 at 1:59 p.m. in Brussels, up 0.2 percent.

“The risks surrounding the economic outlook for the euro area continue to be on the downside,” ECB President Mario Draghi said on March 6 after the Frankfurt-based central bank left its main refinancing rate unchanged at a record low of 0.25 percent.

Energy production fell 2.5 percent for a second month in January and output of durable consumer goods declined 0.6 percent, today’s report showed.

Factory production in Germany, Europe’s largest economy, increased 0.4 percent after a 0.1 percent decline in December, Eurostat said. In France, output fell 0.3 percent, while it increased 1 percent in Italy.

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