Weaker euro zone output data suggests disappointing GDP - analysts

By Robert-Jan Bartunek

BRUSSELS (Reuters) - A bigger-than-expected drop in euro zone industrial output in June suggests that gross domestic product (GDP) growth data, due out on Friday, might also disappoint.

Industrial production in the 19-member-state bloc fell by 0.4 percent month-on-month in June, still 1.2 percent higher year-on-year but below analysts' expectations for a 0.2 percent fall, the European Union's statistics office Eurostat said.

The agency upwardly revised its reading for May to a 0.2 percent decline from previous forecasts for a 0.4 percent fall.

Some analysts now see expectations for quarterly GDP growth of 0.4 percent, as forecast by Reuters data, as optimistic.

"With industry accounting for around 20 percent of gross value added, this could reduce growth by 0.3 percentage points relative to Q1 when GDP rose by 0.4 percent," Capital Economics analysts wrote in a note to clients.

The output slowdown in June was most pronounced in Germany, France and Italy, while the rate of decline slowed in Ireland and Greece. In Finland, the Netherlands, Slovakia and Spain industrial production in June was stronger than in May.

In spite of the euro losing some 16 percent of its value compared to the dollar over the past 12 months, output of more durable items was down month on month.

The largest fall in output was from factories in the durable consumer and capital goods sectors. Energy recovered from falls in previous months to become the most improved sector.

"We see that the euro zone has yet failed to profit from the weaker euro," ING analyst Bert Colijn said.

While services are the largest contributor to growth in the euro zone, industrial production is very important because of its significant indirect impact on other sectors.

For details of Eurostat data click on:

http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

(Editing by Louise Ireland)