Euro zone Nov output jumps but Q4 GDP slowdown seen

Euro zone industrial production rose twice as much as expected month-on-month in November, data showed, signalling the sector contributed to economic growth in the fourth quarter but by less than in the third.

Industrial output in the 16 countries using the euro jumped 1.0 per cent against October, the European Union's statistics office said, also revising upwards October's data to a 0.3 per cent decline from the previously reported 0.6 per cent fall.

Economists polled by Reuters had on average expected a 0.5 percent monthly increase in November production and an 8.5 per cent year-on-year fall. Eurostat said production fell 7.1 per cent annually.

But even with the November jump, economists said industrial production in the last quarter of 2009 could have been less than half the 2.3 per cent increase logged in the third quarter.

"That would be consistent with other evidence suggesting that growth is being sustained but the upward momentum is starting to fade," said Nick Kounis, economist at Fortis.

If output was flat in December it would have risen by 1 percent on the quarter, said Jennifer McKeown, economist at Capital Economics.

"This would subtract 0.3 percentage points from GDP growth compared to the third quarter, perhaps leaving the economy to more or less stagnate," she said.

The data comes as the European Central Bank meets on interest rates. Markets expect no change in the record low cost of borrowing of 1 per cent until the second half of the year, amid little inflationary pressure.

"The euro zone is set for a moderate economic recovery and the ECB will continue to signal that rate hikes are a long way off," Kounis said.

November production was driven mainly by a jump in output of intermediate and durable consumer goods as well as a clear rise in capital goods. Only energy output fell month-on-month.

All major euro zone countries experienced higher production in November, led by France, where output rose 1.2 per cent from the previous month.

"In the near term at least, the euro zone manufacturing sector should be helped by the major de-stocking that has occurred while stimulus measures are still supporting demand," said Howard Archer, economist at IHS Global Insight.

"However, for sustained, robust manufacturing expansion to occur, there needs to be extended healthy growth in orders from both domestic and foreign markets and this currently remains far from certain -- particularly once stimulus measures such as the car scrappage schemes start to be withdrawn," he said.