Production in Eurozone's industrial sector bounced back unexpectedly in May, but the sector is unlikely to sustain the gains given the sluggish economic activity in the single-currency bloc owing to the debt crisis.
Industrial production rose 0.6 percent month-on-month in May, following a 1.1 percent decrease in April. The outcome was better than economists' expectations for a flat reading. However, the improvement is only the second in the past nine months.
"The bounce in Eurozone industrial production in May does little to change the view of a contraction in the overall economy in the second quarter," said Martin van Vliet, an economist at ING Bank NV.
"But with the fiscal squeeze in the Eurozone unlikely to ease soon - as the further austerity measures announced in Spain remind us - and the debt crisis still unresolved, any recovery in Eurozone industrial activity later this year will likely be modest," the economist added.
Output in the intermediate goods industry rose 0.3 percent month-on-month in May, while energy output declined 2.3 percent. Production of capital goods rose 0.9 percent. Output of durables and non-durables increased 0.5 percent and 1.7 percent, respectively.
Among euro area countries, industrial output declined in France, Malta, the Netherlands and Slovenia. In France, output shrank 2.1 percent. Production in Italy and Spain recovered somewhat, while Germany saw a strong 1.5 percent rebound in output.
"It still looks a racing certainty that Eurozone industrial production suffered significant contraction in the second quarter and therefore contributed to a renewed, appreciable drop in Eurozone GDP," IHS Global Insight Chief Economist Howard Archer said.
Annually, total industrial output in Eurozone fell 2.8 percent, faster than the 2.4 percent fall reported in April. Economists had forecast a 3.2 percent decline.
According to the latest purchasing managers' survey by Markit Economics, the manufacturing sector shrank at the sharpest pace in 36 months in June.
In the monthly bulletin published on Thursday, the European Central Bank said the risks surrounding the economic outlook for the euro area continue to be on the downside.
The European Central Bank this month reduced the key refi rate by 25 basis points to a record low 0.75 percent in an attempt to shore up the 17-nation economy that is slipping into recession. The economy escaped recession in the first quarter with the GDP stagnating after a 0.3 percent contraction in the fourth quarter.
Eurozone is expected to recover next year after contracting by 0.7 percent in 2012, the Asian Development Bank said in a report today. The projection for 2013 was lowered to 0.8 percent from 1 percent.
by RTT Staff Writer
For comments and feedback: email@example.com