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 Output in the 18 countries sharing the euro dropped 1.1 percent on
the month in May, following a 0.7 percent rise in April, data on
Monday from the European Union's statistics office Eurostat showed.
That was still less than the 1.2 percent monthly fall forecast in a
Reuters poll <ECONEZ>.
Compared with the same period in 2013, factory gate output grew by
0.5 percent, in line with market expectations, after a 1.4 percent
rise in April
"May’s sharp drop in industrial production highlights the lackluster
and bumpy nature of the euro zone recovery," said Martin van Vliet,
euro zone economist at ING Bank.
The month-on-month decline was led by a 2.4 percent fall in
production of intermediate goods - such as parts used for cars.
There was a 2.2 percent drop in the production of non-durable items
such as food or cosmetics.
The energy sector was the only one to grow, showing a 3 percent
increase after 1.2 percent growth in April.
Analysts said the sharp decline in May production could have been
exacerbated by the timing of public holidays, adding that recent
weakness in output is more pronounced than suggested by other
indicators of economic health.
"We would need to see further PMI weakness before we become
concerned about a stalling industrial (and wider) recovery," said
van Vliet, referring to the monthly Purchasing Managers' Index
surveys of private sector activity.
Industrial production in the euro zone's three biggest economies -
Germany, France and Italy - fell month-on-month. Germany's 1.4
percent decline was the biggest since May 2013.
A 1.3 percent fall in French industrial production was the steepest
since June 2013 and Italy's production registered its worst
performance since November 2012 with a 1.2 percent drop.
Germany's faltering economy has cast further doubt over the euro
zone's prospects for recovery this year, with no other big country
strong enough to pick up the slack.
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The 9.6 trillion euro economy of the euro zone began a steady climb
out of a two-year recession last year, but any rebound is being
hindered by continued austerity aimed at fixing public finances,
joblessness and uneasy markets.
"It does appear that the euro zone manufacturing sector is facing a
tough task to generate and sustain meaningful expansion," said
Howard Archer, chief European economist at IHS.
Investors will look to the July ZEW survey of German economic
sentiment on Tuesday to see how great the impact of the crisis in
Ukraine has been on confidence in Germany, most of whose gas comes
from Russia via Ukraine.
Euro zone industrial output is more than 12 percent below its
pre-crisis peak and has a long way to go before the slack in the
sector is fully eroded, analysts say.
Mario Draghi, head of the European Central Bank, will speak to
lawmakers in the European Parliament later on Monday and may shed
light on the bank's thinking after it cut interest rates and
introduced measures to boost lending last month.
(Reporting by Martin Santa; Editing by Catherine Evans)
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