Euro-zone factory output fell further in October and a German research institute downgraded its growth forecast for the region's biggest economy, adding to fears that the currency bloc is on the brink of recession.
Industrial production fell 0.1% in October from September, the European Union's statistics agency Eurostat said Wednesday. Production rose 1.3% year-on-year, the weakest increase since December 2009 and way below forecasts for a 2.1% rise.
Weakness in October, the first month of the fourth quarter, is an early sign that the economy as a whole may contract during the period.
"Today's production figures confirm that the euro-zone economy is slowly but surely slipping into a new recession," said Martin van Vliet, economist at ING Bank. He calculated that if industrial output is unchanged in November and December, it will knock 0.2 percentage points off economic growth in the fourth quarter.
The Ifo research institute Wednesday revised down its growth forecast for Germany, the powerhouse of Europe's economy, blaming the debt crisis. It said it now expects growth of just 0.4% in 2012, way down from a previous forecast of 2.3% published in June. The growth rate would mark a huge slowdown from the 3% expansion Ifo expects for this year.
Ifo further warned that its forecasts are based on the assumption that the uncertainty in financial markets slowly dissipates and that the debt crisis doesn't escalate. It said that the probability of its central forecast is considerably lower than usual.
Heightened concerns over the euro-zone economy as a whole come at a time when governments are striving to cut spending to return their public finances to a stable footing. Weak growth complicates that effort because it means lower tax receipts and higher spending on benefits, forcing governments to take on more debt.
Forecasts from the European Central Bank earlier in December suggested growth in the 17-state region will slow to just 0.3% in 2012, down from an already tepid 1.6% this year.
The Eurostat figures showed that production in Germany, the bloc's chief manufacturing center, rebounded in October by 0.8% after plunging 2.9% the previous month. Greece, the country at the center of the region's debt crisis, registered the biggest month-to-month fall in industrial output, of 4.4%.
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