Eurozone Industrial Output Rises

Output at the eurozone factories, mines and utilities rose for the second straight month in April, a sign that its more rapid recovery has continued into the second quarter.

The eurozone economy grew at the fastest rate in two years during the first three months of 2017, outpacing the US, Britain and Japan. Business surveys suggest that more rapid pace of growth has continued, and figures for industrial production released Wednesday back them up, MarketWatch reported.

The European Union’s official statistics agency said output was up 0.5% from March, and 1.4% from April 2016. It also raised its estimate for March, and now sees growth of 0.2% rather than a contraction of 0.1%.

Industry made only a modest contribution to first-quarter growth, with output up just 0.2% across the three months. But that was largely due to weakened demand for heating in response to a milder winter than usual. There were signs in April that the second quarter will see more normal levels of output from the utilities, with energy production up 4.7% from March.

Speaking last week, European Central Bank President Mario Draghi presented an upbeat view of the eurozone’s economic outlook, saying growth would likely be higher than previously expected over the coming years.

But that “stronger momentum” wasn’t showing up in the outlook for inflation, he said, as changes in the way the job market works have kept pay rises low.

“The economic expansion has yet to translate into stronger inflation dynamics,” Draghi said. “Therefore a very substantial degree of monetary policy accommodation is still needed.”

Draghi said: “The risks surrounding the eurozone growth outlook are considered to be broadly balanced”. This was a marked change from his comments in April, which described the risks to growth as “tilted to the downside”.

Meanwhile the ECB has downgraded its outlook for inflation to 1.5% in 2017, from 1.7%. It also revised its inflation outlook for the following years to 1.3% in 2018, and 1.6% in 2019 as against 1.6% and 1.7% respectively. The ECB targets inflation of close to, but below, 2%.

In a separate release, Eurostat said the number of people in work rose by 0.4% in the first quarter, the same rate of increase as in the final three months of 2016.

But even with employment now well above its pre-crisis peak, there are few signs of the significant pickup in wage deals that the ECB believes is needed to raise inflation to its target and keep it there.