Eurozone industrial production declined unexpectedly in March, due to a sharp contraction in energy output, fueling fears that the region slipped into a recession at the start of the year.
Industrial production fell 0.3 percent month-on-month in March, figures from Eurostat showed Monday, against economists' forecast for a 0.4 percent increase. The decline followed a 0.8 percent rise in February.
Energy production plunged 8.5 percent from February, when it expanded 8.7 percent due to weather-related factors. The rate of growth in capital goods output slowed to 1.1 percent from 1.4 percent.
Meanwhile, durable consumer goods production dropped at a slower pace of 0.2 percent, following last month's 1.7 percent decline. After falling in February, production of intermediate and non-durable consumer goods rose 1 percent and 0.8 percent, respectively.
On an annual basis, industrial output dropped 2.2 percent, faster than the expected 1.4 percent fall. This comes after a 1.5 percent drop in production in February. Output has decreased for the fourth consecutive month.
April's Purchasing Managers' survey suggests that private sector activity declined in April at the fastest rate since October 2011, signaling that economic downturn is deepening.
The industry will likely remain a drag on the economy in the current second quarter, Martin van Vliet, an economist at ING Bank NV said. With the fiscal squeeze in the Eurozone unlikely to ease soon and the debt crisis flaring up again, any upturn in Eurozone industrial activity later this year will likely be modest.
According to the European Central Bank's Survey of Professional Forecasters, the 17-nation economy will shrink 0.2 percent this year. The central bank expects economic activity to recover gradually over the course of the year.
Eurostat is scheduled to release quarterly national accounts for the first quarter. The 17-nation bloc is widely expected to shrink 0.2 percent, and enter into a recession. In the last quarter of 2011, gross domestic product was down 0.3 percent.
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