Eurozone February output rise confirms momentum

BRUSSELS -Eurozone industrial production rose slightly more than expected month-on-month in February, data showed yesterday, confirming strong momentum in output and adding to arguments for higher interest rates. Industrial production in the 13 countries using the euro rose 0.6 percent in month-on-month terms in February for a 4.1 percent year-on-year rise, the European Union’s statistics office Eurostat announced yesterday. «The eurozone industry continues to power ahead very strongly,» said Holger Schmieding, co-head of Europe economics at Bank of America. «Economic growth in the eurozone is probably still above trend.» Eurostat revised down January’s output data to a 0.5 percent monthly fall from the previously reported 0.2 percent slip, giving a 3.4 percent year-on-year gain, instead of a previously reported 3.7 percent. But economists based their views on a quarterly average, which so far is looking to be stronger in the first three months of 2007 than in the last quarter of 2006. «The 0.6 percent monthly rise is in line with our view that industrial output in the first quarter will be higher than the fourth because there was a relatively sharp inventory correction in Q4, and companies will be replenishing inventories,» said Aline Schuiling, senior economist at Fortis bank. In month-on-month terms output of capital goods and energy production rose the most, both up 0.8 percent, and intermediate goods increased 0.5 percent, Eurostat said. The monthly rise was helped by strong growth in the eurozone’s biggest economy, Germany, as well as France and the Netherlands. Year-on-year, capital goods production surged 7.4 percent and intermediate goods output rose 6.7 percent while energy production slumped 5.5 percent. Ireland recorded a surge of 22.4 percent in annual terms, German output jumped 6.8 percent, Spain rose 3.5 percent and France 2.5 percent. «The ongoing health of the eurozone’s manufacturing sector will reinforce the European Central Bank’s belief that there is no need for monetary policy to be ‘on the accommodative side’,» said Howard Archer, chief UK and European economist at Global Insight.

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