Tags: Europe | Economy | eurzone | output

Eurozone Industrial Output Posts Biggest Monthly Rise Since May 2010

Tuesday, 14 January 2014 07:36 AM EST

Industry across the eurozone managed to offset the impact of a strong euro in November to post the biggest rise in output in three and a half years, official figures showed Tuesday.

Eurostat, the EU's statistics office, said industrial output in the then 17-country eurozone rose by 1.8 percent compared with the previous month. That was ahead of market expectations for a 1.3 percent increase and the biggest monthly increase since May 2010, when the region's debt crisis was particularly acute and Greece got its first international bailout.

The big gain was likely due to activity catching up after drops in the previous two months. Even so, it was fairly broad-based, with the core economies of Germany and France posting healthy gains of 2.4 percent and 1.4 percent. The standout performance was from Ireland, which saw output surge 11.7 percent. No explanation for the Irish increase was provided.

A run of economic figures lately has suggested that the recovery from recession is gaining traction. Figures for fourth-quarter economic growth are due next month and expectations are for an improvement on the third quarter's 0.1 percent quarterly increase.

Jonathan Loynes, chief European economist at Capital Economics, said Tuesday's figures stoke hopes that the eurozone "regained a bit of momentum" at the end of 2013, but cautioned that it would be wrong to get too carried away by one month's data.

"The general trend in industry and the broader economy is weak and the strong euro presents a clear threat to future growth," he said.

As a result, Loynes said the European Central Bank may have to do more to shore up the recovery, possibly by trying to get the euro down.

Though the ECB is not expected to intervene outright in the currency markets, its officials may try to talk the currency down by warning of loose monetary policy ahead. The euro is trading near the $1.37 mark. In late December, it traded as high as $1.3893, its strongest level for over two years.

The euro has surprised some economists as it has remained strong despite the fact that the ECB has cut its main interest rate to a record low of 0.25 percent and hinted that it may enact further easing measures. The U.S. Federal Reserve, on the other hand, has started reducing its monetary stimulus. A looser monetary policy tends to weaken a currency.

A key reason behind the euro's sustained strength is considered to be the calming of the debt crisis. Since ECB President Mario Draghi said in July 2012 that the bank would do whatever it takes to save the euro, the currency has on the whole been ascendant. Few in the markets now think the euro bloc, which grew to 18 members this year with the accession of Latvia, will splinter.

Though that is welcome relief to European policymakers, who have spent the past few years in firefighting mode, the euro's strength will likely raise concerns. In addition to making exports potentially more expensive, a strong currency makes imports cheaper, and for a region with inflation of just 0.8 percent that could be a problem.

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Markets
Official figures show industrial output across the eurozone rose in November at the strongest monthly rate since May 2010, in the latest sign that growth across the region may be picking up.Eurostat, the EU's statistics office, says Tuesday that industrial output in the...
Europe,Economy,eurzone,output
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2014-36-14
Tuesday, 14 January 2014 07:36 AM
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