Despite Germany, euro zone sinks towards recession

Mon May 14, 2012 10:41am EDT
 
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By Robin Emmott

BRUSSELS (Reuters) - Strong production in Germany could not make up for a slump across the rest of the euro zone in March with declining output at factories falling and signaling an oncoming recession may not be as mild as policymakers hope.

Industrial production in the 17 countries sharing the euro fell 0.3 percent in March from February, the EU's statistics office Eurostat said on Monday.

Economists polled by Reuters had expected a 0.4 percent increase overall.

The figures stood in contrast with German data showing output in the euro zone's largest economy up 1.3 percent for the month, according to Eurostat, 2.8 percent when energy and construction are included.

"With the debt crisis, rising unemployment and inflation above 2 percent, household demand is weak and globally economic conditions are sluggish, so that is making people very reluctant to spend and invest," said Joost Beaumont, a senior economist at ABN Amro in Amsterdam.

Eurostat says output fell 1.8 percent in Spain and in France, the euro zone's second largest economy after Germany, output was down 0.9 percent for the month.

The Netherlands saw a decline of 9 percent, but that was after a huge jump in the previous month.

Many economists expect Eurostat to show on Tuesday that the euro zone entered its second recession in just three years at the end of March, with households suffering the effects of austerity programs aimed at cutting debt and deficits.   Continued...