Eurozone industrial output falls two per cent

Eurozone industrial production fell in September compared to August, the European Union's statistics office has said, stoking fears of a rising chance of recession across the region.

Eurostat said output at factories in the 17 euro nations was down two per cent for the month, after a stronger than expected 1.4 per cent expansion in August.

September’s result was higher than the 2.2 per cent fall expected by economists polled by Reuters, but experts said the figure heralded a return to economic contraction.

"The euro area looks set to slide back into recession,” said Markit chief economist Chris Williamson. "Ongoing contraction is likely in coming months. Industrial orders are falling across the region, meaning manufacturers will scale back production in line with weaker sales.”

Williamson said the 4.2 per cent drop in production of capital goods suh as plant and machinery was one of the most worrying signs.

"Both the official and survey data highlight the impact of the region's sovereign debt crisis on the real economy, with uncertainty hitting confidence among business and households alike,” he added.

Declining orders in Europe have fed through to factories, and European manufacturers are lowering production, hurt by state spending cuts and the sovereign debt crisis that is weakening business confidence.

Production in Germany and France, the Eurozone's biggest economies, fell 2.9 per cent and 1.9 per cent respectively in September compared to August, Eurostat said.

Heavily indebted Italy, which looms large over Greece as the biggest concern to the Eurozone's survival, saw industrial output tumble 4.8 per cent in September.

Compared to a year ago, industrial production rose 2.2 per cent in September in the Eurozone, below expectations of a 3.3 per cent rise.

For the 27-nation EU, output fell 1.3 per cent on a monthly basis, and also rose 2.2 per cent on an annual basis.