- File Photo
LONDON: 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 released Tuesday from Eurostat, the EU's statistics office, showed eurozone industrial output rose a monthly one per cent in March, 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 per cent. This will provide a boon to eurozone economic growth figures – the first estimate for the first-quarter is due Wednesday.
The consensus in the markets before the industrial production figures for March were released was for eurozone GDP to have fallen a modest 0.1 per cent, far less than the previous quarter's 0.6 per cent decline.
“The data therefore bode well for GDP to show a significantly weaker decline...and even raises the possibility of the recession having ended,” said Chris Williamson, chief economist at Markit.
Even so, the overall figure masks a huge divergence in economic performance across the eurozone, with many countries, such as Greece and Spain, still in recession.
The eurozone as a whole has been in recession – officially defined as two straight quarters of economic contraction – since the end of 2011.
Even if Wednesday'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 per cent.
The European Central Bank's decision earlier this month to cut its benchmark interest rate to a record low of 0.5 per cent was also predicated on a grim assessment of the economic outlook.
“The latest industrial data confirm that the eurozone has recovered a bit after the disastrous end to Q4,” said Ben May, European economist at Capital Economics. “But for now at least, we would not bank on further rises in production over the coming months driving a recovery in the wider economy.”
Many countries in the eurozone 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.