Euro zone output drops more than expected, recovery ‘stuck in first’

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BRUSSELS (Reuters) – Euro zone factory output fell more than expected month on month in September as production dropped in every sector but energy, while it rose from the same month last year, in a sign the region’s recovery remains fragile at best.

The 9.5 trillion euro zone economy crawled out of an 18-month recession in the second quarter with a 0.3 percent quarterly rise in GDP. Economists expect it to have expanded again in the third quarter, on which data is due on Thursday.

Industrial output in the 17-country bloc fell 0.5 percent on the month, Eurostat data showed on Wednesday. Analysts polled by Reuters had expected a 0.3 percent fall.

In year-on-year terms output rose 1.1 percent in September after a revised 1.1 percent fall in August. The September figure marked the strongest jump in two years, although from a low base due to a big fall in September last year.

“We don’t think that today’s figures cast doubt over the recovery in Europe, but it certainly shows that growth remains stuck in first gear,” said Peter Vanden Houte, chief euro zone economist at ING.

“The weakness of the upturn means that not much is needed to stop it,” he added.

Unemployment in the euro zone remains at record highs of 12.2 percent or nearly 19.5 million people, fuelling concerns over how much household consumption can help exports and drive stronger growth.

Output of durable consumer goods such as cars and electronics was down by 2.6 percent on the month in September, while highly volatile energy sector output rose 1.3 percent after a 0.6 percent drop in August, data showed.

Production in Europe’s two biggest economies, Germany and France, fell in September, while Italy returned to growth after two months of consecutive declines and Spain’s output grew for a third month in a row.

Germany, France, and Italy account for two-thirds of euro zone industrial output.

The worst reading from among all euro zone countries was in Portugal, where production tumbled 11.2 percent on the month after an 8.0 percent rise in August.

(Editing by Hugh Lawson)

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