European industrial production grows more than expected

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

Factory production in the 17nation region rose 1% from July, the European Union’s statistics office in Luxembourg said yesterday. This exceeded the 0.8% median forecast in a Bloomberg News survey of 38 economists.

The decline in July was revised to 1% from 1.5%. Encouraging indicators have begun to accumulate since the eurozone returned to growth in the second quarter, ending a recordlong recession. Factory output expanded for a third month last month, according to Markit Economics, and executive and consumer confidence has improved.

“The hope for manufacturers is that improving confidence in most eurozone 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 yesterday after the data were released.

Industrial output in Germany, Europe’s largest economy, rose 1.8% in August from July, yesterday’s report showed.

Duerr, which makes painting plants for the automotive 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%. Duerr, which is based in Bietigheim-Bissingen, near Stuttgart, saw sales growth in the second half. In France, production increased 0.2% from July, Spain rose 0.1% and Italy fell 0.3%. From a year earlier, eurozone industrial output fell 2.1% in August.

The “gradual recovery” seen by the European Central Bank (ECB) has lifted equities with the Stoxx Europe 600 index up about 5% in the last three months. Europe continues to struggle with the legacy of the debt crisis now in its fourth year, including a 12% jobless rate.

ECB President Mario Draghi said on October 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% in the third quarter after a 0.3% expansion in the three months to end-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.”