Official figures from Brussels are expected to show a return to modest growth in the three months to June
The 18-month double-dip recession in the crisis-stricken eurozone is expected to end on Wednesday with the release of official figures in Brussels showing the return of modest growth in the three months to June.
News on Tuesday of a pickup factory production across the 17-nation single currency area during the second quarter left financial markets convinced that a downturn stretching back to the end of 2011 is now over.
Analysts said the 1.2% jump in industrial production coupled with a stronger performance by the construction sector would be enough to produce growth of 0.2% or 0.3% during the spring and early summer. That would reverse a fall of 0.2% in the first three months of 2013.
The last piece of data to be released before Wednesday's growth figures showed that the output of the combined manufacturing and energy sectors expanded for the fourth time in five months, helped by a strong performance from the eurozone's biggest economy, Germany.
But with the European commission predicting that 2013 as a whole will see the single currency area contract for a second successive year, economists warned that the formal end of recession was unlikely to herald a period of strong growth. The European Central Bank has pledged to keep interest rates low in an attempt to nurture recovery.
Peter Vanden Houte, economist with ING Bank, said: "The [industrial production] report shows that the recession has probably ended in the eurozone. However, with a new bailout needed in Greece and the economic situation still fragile in most of the countries on the periphery of the eurozone, a subdued recovery is probably the best we can hope for."
Figures from Eurostat, the European Union's statistical agency, showed that production rose by 0.7% in June, reversing a small fall in May. The increase was led by a jump of 4.9% in the output of consumer durable goods, while energy production dropped by 1.6%.
Hopes that some of the countries worst affected by the sovereign debt crisis in the eurozone are at last on the mend were fostered by reports that industrial production not only rose in Germany but also in Ireland and Greece. Irish output was up 8.7% in June, while Greek production rose by 2.5%. Falls were recorded in June in the Netherlands (4.1%) and Portugal (2.8%), France (1.5%), Finland (1.5%) and Spain (0.5%).
Germany posted a 2.5% increase in industrial production in June, while the latest survey of business confidence from ZEW rose more than expected in August.
Ben May, an analyst at Capital Economics, said the snapshot of conditions pointed to annual growth in Germany of 2%, much higher than the 0.2% posted in the year to the first quarter of 2013. "But the survey has not been a particularly good predictor of growth in the past and other timely indicators of activity point to weaker growth", May said, adding that much of the increase in eurozone industrial production had come from a build up in stocks of finished goods.
"In all, then, these data support the view that the eurozone as a whole may have exited recession in the second quarter. But we doubt that this will mark the start of a strong and sustained recovery."
Howard Archer, European economist with IHS Global Insight, said: "Latest survey evidence from the purchasing managers shows rising orders and output in July and the hope for eurozone manufacturers going forward is that current rising confidence in most countries increasingly encourages businesses to invest more, and also encourages consumers to lift their spending. Meanwhile, relatively muted input prices are helping eurozone manufacturers to price competitively.
"Even so, conditions remain far from easy for eurozone manufacturers with domestic demand still constrained by strong headwinds in a number of countries. These headwinds include still widespread restrictive fiscal policy (despite increased flexibility now being allowed on fiscal targets), persistently tight credit conditions in many countries, elevated unemployment and limited consumer purchasing power. This is particularly true of the southern periphery eurozone countries, but France and the Netherlands also continue to face significant headwinds. Meanwhile, global growth is currently limited, which is constraining the upside for eurozone exports."
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