+------------------------------------------------------------------------------+
European Industrial Production Unexpectedly Declines (Update2)
2010-08-12 09:34:59.167 GMT
(Updates with comment from economist in fourth paragraph.)
By Simone Meier
Aug. 12 (Bloomberg) -- European industrial production
unexpectedly declined in June, led by a drop in durable consumer
goods such as furniture and home appliances.
Output in the economy of the 16 nations that use the euro
dropped 0.1 percent from May, when it increased 1.1 percent, the
European Union's statistics office in Luxembourg said today.
Economists had projected a gain of 0.6 percent, the median of 32
forecasts in a Bloomberg survey showed. From a year earlier,
June output gained 8.2 percent.
Europe's economic growth may slow as governments reduce
spending to tackle bloated budget deficits and the global
recovery shows signs of losing momentum. Factory orders in the
U.S., the world's biggest economy, fell more than economists
forecast in June, while China's industrial output rose the least
in 11 months. Still, European economic confidence rose to a two-
year high in July and manufacturing growth accelerated.
"It's definitely too soon to declare the euro-zone
manufacturing boom over," said Peter Vanden Houte, an economist
at ING Groep NV in Brussels. "That said, with the U.S. and
China showing signs of slowing, it would be foolish to believe
that Europe would remain unaffected."
The Federal Reserve two days ago described the U.S.
recovery as weaker than anticipated and reversed plans to exit
from aggressive monetary stimulus. Goldman Sachs Group Inc. this
month lowered its 2011 growth forecasts for the U.S. and Japan.
European Currency
The euro extended declines against the dollar after the
data, trading at $1.2841 at 10:30 a.m. in London, down 0.2
percent on the day. While the European currency has advanced 2
percent in the past month, it is down more than 10 percent
versus the dollar since the start of the year.
Production of durable consumer goods in the euro area fell
0.9 percent in June from the prior month, when they rose 3.2
percent, today's report showed. Output of intermediate goods
such as car engines and steel decreased 0.6 percent from May,
when it gained 0.8 percent. Output of capital goods such as
factory machinery increased 0.2 percent in June, while energy
production rose 0.3 percent.
While governments are reining in deficits, investors are
growing more optimistic about the outlook. European economic
confidence rose to the highest in more than two years in July
and manufacturing growth accelerated.
12-Year High
Companies have been largely dependent on exports to bolster
earnings growth as unemployment at a 12-year high prompts
consumers to cut back spending. German exports jumped more than
economists forecast in June as the global recovery boosted
Europe's largest economy.
Bayerische Motoren Werke AG, the world's largest luxury-car
maker, said on Aug. 9 that sales rose 9.1 percent in July,
spurred by demand in China. Linde AG, the world's second-biggest
maker of industrial gases, last week reported an 86 percent jump
in second-quarter profit.
The euro-region economy probably expanded 0.7 percent in
the second quarter from the previous three months, when it grew
0.2 percent, according to a Bloomberg survey of economists. That
would be the fastest growth since the first quarter of 2008.
The EU statistics office will release its report on euro-
area gross domestic product, along with data on May exports to
the U.S., China and the U.K., at 11 a.m. tomorrow in Luxembourg.
For Related News and Information:
Top economy stories: TOP ECO <GO>
Euro-area economic coverage: TNI EU ECO <GO>
Stories on the ECB: NI ECB <GO>
Economic indicator watch: ECOW EU <GO>
Credit crunch page: WWCC <GO>
ECB rate forecasts: BYFC EUR CB <GO>
Global statistics: STAT <GO>
--With assistance from Kristian Siedenburg in Budapest. Editors:
Jones Hayden, Andrew Atkinson
To contact the reporter on this story:
Simone Meier in Zurich at +41-44-224-4134 or
smeier@bloomberg.net
To contact the editor responsible for this story:
John Fraher at +44-20-7673-2058 or jfraher@bloomberg.net
