Factory output in the euro zone fell sharply in April, an early indication the 17-nation economy may shrink again later this year after it narrowly escaped recession in the first quarter.
Industrial production fell in Spain and Portugal, two of the southern European countries engulfed in the region's debt crisis, as well as in Italy, which is fighting to reform its economy and avoid the need for outside help. Germany, the currency bloc's industrial powerhouse, also saw production fall sharply, raising doubts about its ability to withstand the downturn affecting its weaker neighbors.
Industrial production fell 0.8% month-to-month in April, the steepest decline in four months, after a 0.1% reduction in March, statistics agency Eurostat said Wednesday.
That left the overall level of industrial output in the 17 nations that use the euro at its weakest since September 2010.
April is the first month of the second quarter and the weak reading for factory output will add to concerns the euro zone is heading back into recession. The bloc posted zero growth in gross domestic product in the first quarter, barely avoiding a recession after its 0.3% decline in economic output in the last three months of 2011. Many economists define recession as two straight quarters of falling output.
"April's fall in euro-zone industrial production adds to growing evidence that the euro-zone economy took a further turn for the worse in the second quarter," said Martin van Vliet, economist at ING Bank.
Mr. Van Vliet calculated if factory output is unchanged in May and June, the result would knock 0.1 percentage point from GDP growth in the second quarter.
"In terms of policy implications, today's industrial production data clearly reinforce the need for a more expansionary macroeconomic policy in the euro zone," he added.
Weak economic data from the euro zone and a worsening in the bloc's debt crisis have led to calls for more stimulus from the European Central Bank to support growth. The ECB earlier in June left its key interest rate unchanged at a joint record low 1.0%. ECB President Mario Draghi said the bank stands "ready to act" if needed but predicted the economy should recover gradually this year.
Since that policy announcement, the debt crisis has intensified, with Spain's government requesting billions of euros of outside loans for its banks, and fellow euro-zone member Cyprus saying it urgently needs financial assistance.
Inflation figures around the euro zone Wednesday suggested price pressures won't impede a cut in the ECB's key rate.
France's annual rate of inflation ebbed to 2.0% in May from 2.1% in April. In Spain, annual consumer price growth eased to 1.9% from 2.0%.
The ECB aims to keep annual euro-zone inflation at a little below 2.0%. A preliminary Eurostat estimate for inflation in May, which preceded the latest national figures, fell to 2.4% from 2.6%.
Wednesday's production data showed Germany suffering its biggest drop in output in seven months, a Eurostat spokesperson said, while Portugal saw output fall at its fastest monthly pace since Eurostat records began in 2000.
In April compared with the same month of 2011, production in the euro zone fell 2.3%—the biggest annual drop since December 2009. Spain, Portugal and Italy all suffered steep annual falls in output.
Bailed-out country Greece enjoyed a modest 0.3% rise in factory output in April from March, and curbed its annual drop to 2.1% from 8.1% in March.
Production of capital goods, such as machinery, fell across the currency bloc at its fastest rate since September 2011, with a decline of 2.6%.
A steeper fall in overall industrial production in April was only prevented by a 6.9% jump in energy output.
