European Industrial Output Falls More Than Forecast

By Fergal O'Brien

Sept. 12 (Bloomberg) -- European industrial production fell more than economists forecast and payrolls grew at the slowest pace in almost two years as the region's economy teetered on the brink of a recession.

Output in the 15-nation euro area fell 0.3 percent from June, its third consecutive drop, the European Union statistics office in Luxembourg said today. The drop exceeded the 0.2 percent median forecast of 31 economists in a Bloomberg news survey. A separate report showed employment growth eased to 0.2 percent in the second quarter from 0.3 percent in the first.

Europe's economy is showing few signs of recovery after shrinking in the second quarter as investment, exports and consumer spending declined. The European Commission, which cut its growth forecasts for the region this week, has forecast recessions in Germany and Spain, the region's largest and fourth-largest economies.

``Today's figures provide further evidence that the economic cycle is probably hovering around its trough, as the European Central Bank itself is acknowledging,'' said Aurelio Maccario, chief euro zone economist at Unicredit MIB in Milan. ``The problem is that the recovery will be slow and timid.''

Germany, France

From a year earlier, euro-area output fell 1.7 percent in July after declining 0.8 percent in June, the industrial production report showed. Production in Germany fell 1.8 percent in July from the previous month, while French output rose 1.2 percent after declining in the previous two months. Italian production slipped 1.1 percent.

A separate report from the Bank of France showed that French manufacturing confidence held near a five-year low in August as orders declined.

Annual growth in payrolls slowed to 1.2 percent in the second quarter from 1.6 percent in the previous three-month period, according to the EU data. That's the slowest pace since the final quarter of 2005. The statistics office estimates that the total number of people employed in the euro area was 146 million in the second quarter. The total in the 27-nation EU was 226.4 million.

To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.