Euro-Area Industrial Production Increases More Than Forecast

Euro-area industrial output expanded more than economists forecast in August as the currency bloc’s recovery gained momentum.

Factory production in the 17-nation region rose 1 percent from July, the European Union’s statistics office in Luxembourg said today. That exceeded the 0.8 percent median forecast in a Bloomberg News survey of 38 economists. The decline in July was revised to 1 percent from 1.5 percent.

Encouraging indicators have begun to accumulate since the euro area returned to growth in the second quarter, ending a record-long recession. Factory output expanded for a third month in September, according to Markit Economics, and executive and consumer confidence has improved.

“The hope for manufacturers is that currently improving confidence in most euro-zone countries will encourage businesses to invest more and also encourage consumers to spend more,” said Howard Archer, chief European economist at IHS Global Insight in London. “Even so, conditions remain far from easy for manufacturers, so they still have their work cut out to generate and then maintain reasonable growth.”

The euro remained higher against the dollar after the data were released. It was at $1.3559 as of 11:03 a.m. London time, up 0.1 percent from Oct. 11.

German Growth

Industrial output in Germany, Europe’s largest economy, rose 1.8 percent in August from July, today’s report showed. Duerr AG, which makes painting plants for the automobile industry, last month boosted its 2013 margin guidance for earnings before interest and taxes by half a point to a range of 7.5-8 percent. Duerr, based in Bietigheim-Bissingen, near Stuttgart, sees sales growth in the second half.

In France, production increased 0.2 percent from July, Spain rose 0.1 percent and Italy fell 0.3 percent. From a year earlier, euro-region industrial output fell 2.1 percent in August.

The “gradual recovery” seen by the European Central Bank has boosted equities, with the Stoxx Europe 600 Index up about 5 percent in the last three months. Europe continues to struggle with the legacy of the debt crisis now in its fourth year, including an unemployment rate of 12 percent.

ECB President Mario Draghi said on Oct. 2 the bank will keep key interest rates “at present or lower levels for an extended period,” based in part on the “broad-based weakness in the economy.” Economists in a Bloomberg survey see economic growth slowing to 0.2 percent in the third quarter after a 0.3 percent expansion in the three months through June.

The industrial sector is “slowly recovering,” said Chris Williamson, chief economist at Markit Economics in London. “Policymakers will be encouraged by the ongoing recovery trend but will be reminded of the huge surplus of capacity that persists compared to before the crisis struck, which means any growth is unlikely to ring inflationary alarm bells for quite some time.”

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