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Euro zone output falls in July, points to shaky recovery

A worker welds a metal furnace in a factory in Gravellona Lomellina, 45km (27 miles) southwest of Milan, June 11, 2013. REUTERS/Stefano Rell
A worker welds a metal furnace in a factory in Gravellona Lomellina, 45km (27 miles) southwest of Milan, June 11, 2013. REUTERS/Stefano Rell

BRUSSELS (Reuters) - Output at the euro zone's factories fell by much more than expected in July in a sign of the weak demand from European households and the shakiness of the bloc's economic recovery.

Industrial production in the 17 countries sharing the euro fell 1.5 percent in July, the EU's statistics office Eurostat said on Thursday. That compared with a 0.1 percent increase expected by economists in a Reuters poll.

After a year and a half in recession, the euro zone returned to growth in the April-to-June period and many economists say the recovery will continue into the third quarter.

But the challenge for the currency area is to turn very modest growth, relying mostly on exports to the rest of the world, into a sustained upturn that would bring down record unemployment and help households return to spending.

Signs of a rebound in domestic demand were not encouraging.

Industrial production was down 2.1 percent in July compared to the same month a year ago. Eurostat also revised down its annual reading for June to -0.4 percent from an earlier reported 0.3 percent gain.

In Germany, Europe's largest economy, industrial production fell 2.3 percent in July from June and while Finland and Spain managed an increase, France, Italy, Ireland, Portugal and the Netherlands all saw a poor performance from their factories.

The data backs up a Reuters poll this week suggesting that euro zone gross domestic product will rise only by around 0.2 to 0.4 percent in each quarter until early 2015.

(Reporting by Robin Emmott; editing by Philip Blenkinsop)

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