Euro zone industry output up in August much more than expected

BRUSSELS (Reuters) -Euro zone industrial production soared in August far beyond expectations as manufacturers boosted investment despite fears of an upcoming recession, official estimates showed on Wednesday.

The European Union's statistics office Eurostat said industrial production in the 19 countries sharing the euro increased 1.5% month-on-month in August for a 2.5% year-on-year rise.

Economists polled by Reuters had expected much more modest increases of 0.6% on the month and 1.2% year-on-year, after production fell in July.

The better-than-expected data failed however to dispel fears of a recession.

"All the evidence suggests that euro zone industry is heading for a significant contraction in the coming months," said Andrew Kenningham, chief Europe economist at Capital Economics, a London-based research outfit.

He underlined that the rise in August did not fully reverse the 2.3% monthly fall recorded in July.

The positive reading was driven by output of capital goods, such as machinery, which rose 2.8% compared with July, in a sign of optimism pointing to new appetite for investment.

Manufacturers also produced more consumer goods, while they cut their energy output, data showed.

Among the bloc's largest economies, France's industrial production rose 2.5% on the month, Italy's was up by 2.3%, whereas output declined in Germany by 0.5%.

(Reporting by Francesco Guarascio; Editing by Toby Chopra and Jon Boyle)

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