Eurozone industrial rebound runs out of steam

[September 14, 2010]  LONDON (AP) -- Industrial production in the 16 countries that use the euro was flat in July from the previous month, official figures showed Tuesday, a further sign that the sector's spring recovery has run its course.

Eurostat, the EU's statistics office, said the unchanged reading for July followed a 0.2 percent decline in June and huge increases over the previous three months.

The unchanged reading was lower than expected -- the consensus forecast in the markets was that industrial output rose 0.2 percent during the month.

The figures provide further evidence that the strong rebound in the industrial sector in the spring has eased as U.S. economic growth has slowed, many European countries enact austerity measures to get their public finances into shape and the previous need for restocking has diminished.

As a result, analysts say the eurozone economy will not grow as rapidly in the third quarter as it did in the second. Booming German exports of industrial goods, such as cars and heavy machinery, were the main reason the eurozone economy expanded 1 percent during the second quarter, way higher than expectations earlier in the year.

"Evidence is mounting that activity peaked in the second quarter and manufacturers will find it increasingly difficult to sustain their impressive first-half performance during the first half of 2010 over the coming months," said Howard Archer, chief European economist at IHS Global Insight.

Despite the disappointing readings over the past two months, industrial production in the eurozone is still 7.1 percent higher in the year to July. However, that's down from June's 8.3 percent rise.

Eurostat also said Tuesday that industrial production was unchanged for the wider 27-country EU, which also includes non-euro members such as Britain and Sweden. On a year-on-year baisis, industrial output was 6.8 percent higher, down from June's 7.9 percent.

[Associated Press; By PAN PYLAS]

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