Europe Economy

Euro-Zone Industrial Output Rose in August


Euro-zone industrial production rose much more than expected in August, the European Union's statistics office said, raising hopes of continued strong growth despite a rising euro and the global credit crunch.

Eurostat said on Friday that seasonally adjusted output in the 13 countries using the euro gained 1.2% month-on-month for an annual increase of 4.3%.

Analysts polled by Reuters had expected output to have risen 0.2% month-on-month and 2.0 in annual terms.

Eurostat also revised up its July production data to gains of 0.7% month-on-month and 3.9% year-on-year, from the rises of 0.6 and 3.7% initially reported.

The monthly increase in August industrial production was fuelled mainly by durable consumer goods, which soared 3.8%. Non-durable goods rose 1.6%.

In annual terms capital goods production rose the most, 6.6%, followed by non-durable consumer goods, which increased by 5.2%.

Industrial production accounts for less than a third of the euro zone's gross domestic product, which is driven mainly by the services sector.

The strong euro zone figures came as no surprise after Germany, the area's biggest economy, reported higher than expected August production of 1.7% month-on-month and an annual gain of 5.6%.

Italy, the euro zone's third-largest economy, also surprised on the upside, by reporting a 1.3% monthly increase and a 3.0% annual rise.

The second-biggest economy, France, saw its output grow by 0.3% month-on-month and 3.6% annually.

The healthy figures, notably for durable goods, could suggest that the euro zone's economy initially coped well with the strong euro, despite complaints from some politicians that the exchange rate was harming growth.

They could also indicate the real economy in the area was initially not greatly hurt by the financial turmoil resulting from the crisis in the US subprime mortgage sector.

The strong production figures could also be seen as an argument for the European Central Bank to increase its interest rates, although many analysts believe the ECB will not raise borrowing costs for some time due to the credit turmoil.

On Thursday, some monetary policy makers said the ECB could rule out raising rates from the current 4.0% to tackle inflation threats.

Euro-zone inflation rose to 2.1% in September, above the ECB's price stability target.

Eurostat said that in the whole 27-nation European Union, industrial production rose 0.9% in August from July for an annual increase of 4.0%.