Euro zone industry stumbles in May, recovery still frail

Mon Jul 14, 2014 6:20am EDT
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By Martin Santa

BRUSSELS (Reuters) - Euro zone industrial production dropped sharply in May with only the energy sector thriving, another sign that the bloc's economic recovery remains fragile.

Output in the 18 countries sharing the euro dropped 1.1 percent on the month in May, following a 0.7 percent rise in April, data on Monday from the European Union's statistics office Eurostat showed. That was still less than the 1.2 percent monthly fall forecast in a Reuters poll ECONEZ.

Compared with the same period in 2013, factory gate output grew by 0.5 percent, in line with market expectations, after a 1.4 percent rise in April

"May’s sharp drop in industrial production highlights the lackluster and bumpy nature of the euro zone recovery," said Martin van Vliet, euro zone economist at ING Bank.

The month-on-month decline was led by a 2.4 percent fall in production of intermediate goods - such as parts used for cars. There was a 2.2 percent drop in the production of non-durable items such as food or cosmetics.

The energy sector was the only one to grow, showing a 3 percent increase after 1.2 percent growth in April.

Analysts said the sharp decline in May production could have been exacerbated by the timing of public holidays, adding that recent weakness in output is more pronounced than suggested by other indicators of economic health.

"We would need to see further PMI weakness before we become concerned about a stalling industrial (and wider) recovery," said van Vliet, referring to the monthly Purchasing Managers' Index surveys of private sector activity.   Continued...

A band-conveyor with iron ore for steel production is seen at Europe's largest steel factory of Germany's industrial conglomerate ThyssenKrupp AG in the western German city of Duisburg March 17, 2010.  Picture taken March 17, 2010.    REUTERS/Ina Fassbender