Euro zone October output weaker than expected

 

Euro zone industrial output was much weaker than expected in October, the EU's statistics office data showed, raising economists' concern that fourth quarter economic growth could be softer than expected.

Seasonally adjusted industrial output fell 0.8 per cent in the 12 countries using the euro in October against September for a year-on-year rise of barely 0.1 per cent.

Market consensus was for a 0.4 per cent decline and a yearly gain of 1.0 per cent.

The monthly decline in October follows a fall in September which Eurostat revised to a 0.3 per cent from the previously reported 0.4 per cent. The September annual growth was revised up to 1.2 per cent from 1.0 per cent.

"We've got a negative number in September and now minus 0.8 percent in October - that means there is a sharply declining profile during the third quarter and beginning of the fourth quarter," said Lorenzo Codogno, economist at Bank of America.

"This suggests that simply because of the base effect, the fourth quarter will probably be very weak overall as well," he said. "I would expect GDP growth because of that to be on the soft side in the fourth quarter."

Third quarter gross domestic product data for the euro zone showed quarterly growth has been accelerating since the start of the year to reach 0.6 per cent quarter-on-quarter in the July-September period.

The European Commission has forecast fourth quarter growth at a quarterly 0.4 per cent, accelerating to 0.5 per cent in the first quarter of 2006.

Business and investment confidence indicators, including the German ZEW and Ifo, point to stronger economic activity ahead, but consumer confidence is still weak and economists caution economic recovery is still fragile.