Reuters reported that euro zone industrial production fell unexpectedly in March suggesting the region's economy grew slower in the first quarter than economists anticipated.

The European Union's statistics office Eurostat said that industrial production in the 17 countries using the euro fell 0.2% in March 2011 as against February 2011 for a 5.3% YoY rise. Economists polled by Reuters had expected a 0.3% monthly increase and a 6.2% annual gain.

Eurostat also revised upwards its February data to a monthly rise of 0.6% from 0.4% and an annual rise of 7.7% from 7.3%. Economists said that in the January to March 2011 period industrial production rose by 1% QoQ, below the 1.8% increase in the last three months of 2010.

Mr Ken Wattret chief euro zone economist at BNP Paribas said that "This is a bit disappointing it is a solid if unspectacular rate of growth and it suggests perhaps some downside risks to the estimate for the first quarter GDP. Our forecast is 0.7% QoQ growth and on the basis of the production numbers today there could be some downside risk to that."

The monthly fall was driven by shrinking output of capital goods, energy and non durable consumer goods. Economists said prospects for industrial output were still fairly bright in the near term, but could deteriorate later.

Mr Martin van Vliet, economist at ING bank, said that "Indeed, with richly filled order books and low inventory levels, euro zone industrial output look set to expand further in the current second quarter. But the combination of high oil prices, a strong euro and the softening in world trade momentum makes us more cautious about industry's prospects for the second half of this year."

(Sourced from www.reuters.com)