European Industrial Production Plunges by Record 21.6%, More Than Forecast

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    Europe Industrial Production Declines by Record 21.6% (Update1)
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    By Brian Swint


    June 12 (Bloomberg) --
    European industrial production dropped by the most on record in April as the worldwide recession ravaged demand for goods.

    Production in the euro region plunged 21.6 percent from a year earlier, the most since the data series started in 1986, the European Union’s statistics office in Luxembourg said today. Economists expected a 19.8 percent decline, according to the median of 14 estimates in a Bloomberg News survey. From March, output declined 1.9 percent.

    The global economy will contract for the first time since World War II this year as the fallout from the financial crisis leads companies to scale back production and run down stocks, the World Bank predicts. The European Central Bank this month kept its benchmark interest rate at a record-low 1 percent and will soon buy bonds in a bid to improve the flow of credit.

    “The region has simply been hammered by the downturn in global demand and hampered by the run-up in the euro,” said Peter Dixon, an economist at Commerzbank AG in London. “We see interest rates on hold right through next year. The euro zone has been especially badly hit compared to the more service- oriented economies of the U.K. and the U.S.”

    Production of durable consumer goods such as washing machines in the 16-member euro region declined an annual 22.4 percent in April, and output of capital goods such as factory machinery dropped 26.7 percent, according to today’s report.

    Machinery Orders

    The euro’s 12 percent gain against the dollar since February is further hurting manufacturers’ prospects in the region. German plant and machinery orders declined the most on record in April, the VDMA lobby said last month. The euro extended declines today following the output data and was trading at $1.4046 at 10:25 a.m. in London, down 0.4 percent.

    Heidelberger Druckmaschinen AG, the world’s largest maker of printing presses, said on June 9 that it expects to get state aid to help survive a slump in equipment orders this year. The company had a fourth straight quarterly loss in the first three months of this year.

    The euro-area figures contrast with other economies, where there are signs that the worst of the recession may be over. Data today showed that industrial output in China, the world’s third-biggest economy, rose more than economists expected in May. U.S. output contracted at the slowest pace in six months in April, the Federal Reserve said last month.

    Global Growth

    The International Monetary Fund yesterday raised its forecast for global growth next year, a person familiar with the matter said. At the same time, The World Bank predicted the world economy will shrink almost 3 percent this year, almost double what it projected in March.

    The ECB kept its benchmark rate unchanged on June 4 at a record low of 1 percent and will buy 60 billion euros ($84 billion) of covered bonds in an effort to revive lending in Europe. The bank said yesterday that economic growth may resume in the middle of next year.

    To contact the reporter on this story: Brian Swint in London at
    Last Updated: June 12, 2009 05:40 EDT