Eurozone industrial output up for 3rd month in May

[July 14, 2010]  LONDON (AP) -- Industrial output in the 16 countries that use the euro rose for the third month running in May, official figures showed Wednesday, but the increase was slightly lower than anticipated by the markets.

Eurostat, the EU's statistics office, revealed that industrial production rose by 0.9 percent in May from the previous month, the same as the increase recorded in April.

However, the rise was lower than the 1.2 percent expected by economists.

Most of the eurozone's major economies, such as Germany, France and Italy, posted solid monthly gains, but output in Spain slipped.

On a year-on-year basis, industrial production was 9.4 percent higher in May, down slightly on April's 9.6 percent.

Industry has been the main driver behind the eurozone's modest recovery from recession, partly because exporters have enjoyed the benefit of the lower euro, which makes their goods cheaper in the international marketplace. The single European currency has fallen from a peak above $1.51 last November to a low around $1.18 last month as investors took fright about the debt problems afflicting many countries, most notably Greece.

A rebuild in stock levels following the end of the recession has also helped the sector.

"May's eurozone industrial production data suggest that the fiscal crisis is not yet having any discernible effect on the recovery in the sector," said Ben May, European economist at Capital Economics.

For the EU as a whole, which includes non-euro members such as Britain and Sweden, industrial output was up a monthly 1 percent in May for an 8.7 percent year-on-year gain.

Elsewhere, Eurostat said consumer price inflation in the year to June was 1.4 percent, unchanged on its previous estimate. June's rate was down from May's 17-month high of 1.6 percent and is likely to further cement market expectations that the European Central Bank will not be raising its main interest rate from the current 1 percent any time soon.

The European Central Bank is tasked with setting interest rates to keep inflation at close to, but below 2 percent.

More pressing than inflation is whether economic growth will weaken in the wake of the sovereign debt crisis that has seen a number of countries enact budgetary cuts to appease the markets.

[Associated Press; By PAN PYLAS]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.