Industrial production across the 16-nation euro-zone plunged sharply in February, reflecting a slowdown across all industrial sectors and amplifying worries about the depth of the region's recession.
The statistics agency Eurostat on Thursday said industrial production fell 2.3% from January. Compared to February 2008, production plunged 18.4%, the biggest annual drop since records began in 1990.
January industrial production, however, was revised upward to show a 2.4% monthly fall and a 16% annual decline. Eurostat previously estimated a 3.5% monthly drop and a 17.3% year-on-year fall.
Economists said the news reinforced unease about the euro-zone economy's first-quarter performance.
Even with the large upward revision to the January figures and assuming that output holds steady in March, industrial production would see a quarterly contraction of around 7% in the first quarter, not far off the sharp plunge seen in the final quarter of 2008, said Daniele Antonucci, European economist at Capital Economics.
"This suggests that even our pessimistic 2009 GDP (gross domestic product) forecast of [a 4% contraction], while still miles away from the consensus, looks increasingly optimistic," Antonucci said. "The chances are that economic activity might contract much more," providing fodder for European Central Bank members who favour further rate cuts.
The euro extended a loss versus the U.S. dollar and traded at $1.3134, down 0.6% on the day.
Eurostat said production of capital goods saw an annual fall of 24.7%, while durable goods dropped 22.1% and intermediate goods dropped 24.2%. Energy production was down 3.6% on an annual basis, while non-durable consumer goods fell 6.3%.
Germany, the euro-zone's primary manufacturing powerhouse and largest economy, saw a 20.6% annual drop in industrial production. France saw a 16.3% drop, while Italy posted a 20.7% decline and Spain dropped 22%.
The ECB cut its key lending rate by 25 basis points, or 0.25 of a percentage point, earlier this month to 1.25%.
Eurostat also confirmed an earlier estimate showing that annual March consumer inflation across the euro zone slowed to 0.6% in March from 1.2% in February, the slowest pace since comparable records began in 1996.
The inflation rate will likely move sideways in April, and resume dropping in May, mostly due to comparisons with last year when prices had surged, said Marco Valli, an economist at UniCredit MIB in Milan.
UniCredit expects annual inflation to turn negative in June, "but there's a tangible risk that we may fall below zero as soon as next month. The trough should be in July at about -0.5%," he said.
