Industrial production in the 17 countries that share the euro rose for the second straight month in August, driven by a surge in output of durable consumer goods that suggests southern European economies may be on the mend.
The rise in output was a surprise and significantly stronger than expected, coming at the end of a week that started with the International Monetary Fund once again lowering its growth forecast for the euro zone.
Industrial output in the currency bloc rose by 0.6% from July, the European Union's official statistics agency Eurostat said Friday, confounding economists' forecasts for a 0.4% decline.
The rise follows a 0.6% rise in July, when it was driven by an increase in production of capital goods.
In August, production of capital goods rose again, but more slowly than the 3.9% rise in output of durable consumer goods.
On year, overall output fell 2.9%. The latest monthly rise came from a pickup in southern European economies that have been contracting as a result of austerity programs and scarce credit.
Industrial production rose by 1.7% in Italy, by 1.5% in Spain, by 2.5% in Greece and by 6.8% in Portugal. By contrast, industrial output in Germany fell by 0.4%.
The rise in industrial output is an indication that the currency bloc has avoided, at least for now, the sharp slowdown some economists feared might exacerbate the debt crisis.
Many economists expect output to decline in the euro zone overall in the July to September quarter, but opinions are divided on the economy's prospects beyond that.
The economy contracted by 0.2% in the second quarter and another consecutive fall would meet a common definition of recession.
Ben May, an economist at Capital Economics, said that if production were to be flat in September, the July and August rises mean output would be up by almost 1% in the third quarter as a whole.
"This alone would boost quarterly [gross domestic product] growth in Q3 by around 0.3 percentage point, suggesting that GDP might even have expanded modestly last quarter," said Mr. May.
"We suspect that this pickup will have been at least partially offset by weaker growth elsewhere, implying that the economy probably contracted in Q3, albeit by less than falls of around 0.5% or more implied by the key euro-zone business surveys."
The pickup in industrial production was a surprise partly because recent surveys of manufacturers have suggested that factories were cutting output.
The Purchasing Managers Index for the euro zone's manufacturing sector pointed to contractions in July and August, and the third quarter as a whole.
The European Commission's monthly survey recorded a decline in manufacturing confidence in both July and August.
"The gap between hard data and surveys continues to widen in August," said Violante di Canossa, an economist at Credit Suisse.
"It remains to be seen whether sentiment is overstating the weakness of the economy."
There are signs of continuing weakness in other data released Friday.
France's current account deficit was wider in August than July as the goods deficit rose sharply, data from the Bank of France showed.
The euro zone's second-largest economy recorded a deficit in its trade in goods of €5.7 billion ($7.37 billion), wider than the €4.3 billion in July.
And in the Netherlands, the trade surplus fell in August, to €2.1 billion from €2.8 billion in July.
The weak economy is making it harder for Europe's leaders to bring an end to their fiscal and banking crises, with sluggish tax revenue continuing to undermine public finances.
wsj.com
The rise in output was a surprise and significantly stronger than expected, coming at the end of a week that started with the International Monetary Fund once again lowering its growth forecast for the euro zone.
Industrial output in the currency bloc rose by 0.6% from July, the European Union's official statistics agency Eurostat said Friday, confounding economists' forecasts for a 0.4% decline.
The rise follows a 0.6% rise in July, when it was driven by an increase in production of capital goods.
In August, production of capital goods rose again, but more slowly than the 3.9% rise in output of durable consumer goods.
On year, overall output fell 2.9%. The latest monthly rise came from a pickup in southern European economies that have been contracting as a result of austerity programs and scarce credit.
Industrial production rose by 1.7% in Italy, by 1.5% in Spain, by 2.5% in Greece and by 6.8% in Portugal. By contrast, industrial output in Germany fell by 0.4%.
The rise in industrial output is an indication that the currency bloc has avoided, at least for now, the sharp slowdown some economists feared might exacerbate the debt crisis.
Many economists expect output to decline in the euro zone overall in the July to September quarter, but opinions are divided on the economy's prospects beyond that.
The economy contracted by 0.2% in the second quarter and another consecutive fall would meet a common definition of recession.
Ben May, an economist at Capital Economics, said that if production were to be flat in September, the July and August rises mean output would be up by almost 1% in the third quarter as a whole.
"This alone would boost quarterly [gross domestic product] growth in Q3 by around 0.3 percentage point, suggesting that GDP might even have expanded modestly last quarter," said Mr. May.
"We suspect that this pickup will have been at least partially offset by weaker growth elsewhere, implying that the economy probably contracted in Q3, albeit by less than falls of around 0.5% or more implied by the key euro-zone business surveys."
The pickup in industrial production was a surprise partly because recent surveys of manufacturers have suggested that factories were cutting output.
The Purchasing Managers Index for the euro zone's manufacturing sector pointed to contractions in July and August, and the third quarter as a whole.
The European Commission's monthly survey recorded a decline in manufacturing confidence in both July and August.
"The gap between hard data and surveys continues to widen in August," said Violante di Canossa, an economist at Credit Suisse.
"It remains to be seen whether sentiment is overstating the weakness of the economy."
There are signs of continuing weakness in other data released Friday.
France's current account deficit was wider in August than July as the goods deficit rose sharply, data from the Bank of France showed.
The euro zone's second-largest economy recorded a deficit in its trade in goods of €5.7 billion ($7.37 billion), wider than the €4.3 billion in July.
And in the Netherlands, the trade surplus fell in August, to €2.1 billion from €2.8 billion in July.
The weak economy is making it harder for Europe's leaders to bring an end to their fiscal and banking crises, with sluggish tax revenue continuing to undermine public finances.
wsj.com
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