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European industrial economy grows strongly in January, index hits 6-year high
Industrial output in the 19-nation euro zone grew at the fastest pace in more than six years in January, according to data last Monday, which is a welcome development, but many economists believe that in the coming months given the global recession, , industrial output in the euro zone may plummet. Industrial output, which includes everything from energy extraction to aircraft production, rose 2.1 percent in January, the European Union's statistics agency said. This was the fastest monthly increase since November 2009. The increase was also well ahead of expectations, after the consensus was for a modest 1.6% increase in January. The two months before that had declined, falling 0.5% in December. Industrial output in Germany, Europe's largest economy, rose 2.9% in January, Eurostat data showed, with Ireland's industrial output soaring 12.7%. Analysts said that the depreciation of the euro has benefited manufacturers a lot, and their products have become more competitive in the international market. The lower costs of oil and raw materials also help euro zone manufacturers to compete on price. With industry accounting for around 20% of the euro zone economy, the January increase also played a big role in the first-quarter figures. Jack Allen, chief European economist at Capital Economics, said January's growth was likely just a sign that survey evidence showed the industrial sector remained weak and the region's economic recovery remained slow this year. An expected slowdown in the growth component was the main driving force behind the European Central Bank's recent decision to step up its stimulus program, hoping to lower interest rates and expand its bond-buying program to spur economic growth and help inflation edge up. Over the past year, the euro zone economy has grown on a small scale. Few economists forecast an uptick in the first quarter. Cathal Kennedy, European economist at Royal Canadian Capital Markets, said: 'We expect slower momentum, but nonetheless, the industry is likely to make a meaningful contribution to growth in the first quarter.' China's industrial output rose 2.8% year-on-year, a sharp reversal from the 0.1% drop in December last year.