Industrial production in the Euro Area increased for the second successive month in March and at a significantly faster pace, driven by a marked gain in energy output, raising hopes that the currency bloc's ongoing recession likely eased, or perhaps ended, in the first quarter.
Industrial production advanced 1 percent month-on-month in March, notably faster than February's revised 0.3 percent rise, statistical office Eurostat said Tuesday. The increase was the strongest since July 2011.
The growth rate was forecast to rise to 0.5 percent from the previous month's originally reported 0.4 percent.
"Although significantly better than expected, it should be noted that Eurozone industrial production was lifted in March by a sharp jump in energy output which was undoubtedly lifted by unseasonably cold weather in many countries." IHS Global Insight Chief UK and European Economist Howard Archer said.
Driving the upturn in output, growth in energy production accelerated to 3.8 percent in March from 1.9 percent in April. Capital goods production rose 1.2 percent month-on-month, after rising 0.9 percent a month earlier.
Meanwhile, production of intermediate goods and non-durable consumer goods dropped 0.1 percent and 0.7 percent, respectively.
Among member states, with a 1.7 percent gain in output Germany made a strong contribution to the overall growth. The Spanish industrial sector returned to growth with a 2.1 percent rise expansion, following February's 1.4 percent fall.
Compared to March 2012, industrial production decreased 1.7 percent, slower than the 3.2 percent fall seen in February and the 2 percent decline forecast by economists. The rate of change for February was revised down from a 3.1 percent fall.
Meanwhile, the purchasing managers' survey for April showed that the Eurozone manufacturing sector contracted for the twenty-first successive month, in a clear sign that the region's manufacturers continue to face a very tough environment. Production contracted at a faster rate for the third consecutive month.
The European Central Bank cut its key interest rate by 25 basis points to a record low of 0.50 percent at this month's, after holding the rate steady for nine consecutive months.
In April, the European Commission lowered the economic outlook for the euro area for this year and the next, saying that the recovery is expected to be too slow to reduce joblessness. The commission said that the economy will contract 0.4 percent this year as the region heads into its second year of recession.
Last week, professional forecasters surveyed by the European Central Bank lowered their forecast for the Eurozone economy. The economy is forecast to contract 0.4 percent in 2013, compared with the stagnation projected three months ago. In 2014, the gross domestic product is seen growing 1 percent.
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