Industrial output in the 17 countries that share the euro fell sharply in October, a development that raises fresh questions about the sustainability of the currency area's return to economic growth. The European Union's statistics agency said industrial production was 1.1% lower than in September, the second straight month of decline and the sharpest drop since September 2012. The decline was spread across most of the currency area, with only Italy and Estonia recording increases in output. The decline in output came as a surprise, with 24 economists surveyed by The Wall Street Journal last week having estimated that output rose by 0.2% during the month. It raises the possibility that the euro zone's return to growth may come to a halt in the final quarter of this year, having already weakened in the third quarter. The decline in industrial output was led by the energy sector, which recorded a 4% drop in production during October. That wasn't a great surprise, given that temperatures across Europe were higher than usual during that month. However, output of capital goods fell by 1.3%, while output of consumer durables fell by 2.4% and of non-durables by 0.9%. That suggests the drop in production was a response to weak demand from businesses and consumers. Figures released last week showed retail sales in the euro zone fell in October, while a November survey of consumers recorded the first decline in confidence this year. The euro-zone economy returned to growth in the three months to June, having contracted in each of the previous six quarters. But having expanded by 0.3% in the second quarter, it grew by just 0.1% in the third. Most economists expect the economy to grow this quarter, and pick up slowly in 2014. The European Central Bank's economists last week said they expect the currency area's economy to expand by 1.1% in 2014, having contracted by 0.4% this year. A survey of purchasing managers conducted by data provider Markit had indicated that manufacturing output grew at a faster pace in October, and again in November, but official figures for October suggest just the opposite. The ECB cut its key interest rate to a record low of 0.25% in November, and has said it has other tools at its disposal to boost growth and prices, although policy makers appear in no rush to use them. The decline in industrial output as the fourth quarter began may persuade them to move more decisively. "The poor euro-zone industrial production keeps pressure on the ECB to take further stimulative action," said Howard Archer, an economist at IHS Global Insight. Figures released Thursday by the Organization for Economic Cooperation and Development showed that, with the exception of Brazil, the euro zone was the weakest part of the global economy in the third quarter. OECD figures recorded a 0.9% increase in the combined gross domestic products of the Group of 20 largest economies, which together account for 90% of world output. That marked a pickup from the 0.8% rate of growth recorded in the second quarter, and was driven by accelerations in China, India, the U.S., the U.K. and Canada. By contrast, Brazil's economy slipped into contraction for the first time since early 2009. The euro zone recorded the smallest expansion outside Brazil, and the industrial production figures suggest it will once again be among the weakest performers this quarter.
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