-Jessica Hinds, economist with Capital Economics
The Euro zone industrial production increased markedly more than expected in February, reinforcing the view the ECB's massive stimulus measures are already bearing fruit. According to Eurostat, industrial output in 19 countries sharing the Euro soared 1.1% month-on-month, marking the biggest monthly gain in 10 months. Economists, however, had expected a 0.4% increase. Measured on an annual basis, industrial production rose 1.6%. While services are the biggest contributor to Euro zone's GDP, industrial production is an important component of economic output due to its considerable indirect impact on other sectors.
Meanwhile, the ECB's quarterly bank lending survey showed its asset-buying programme is boosting credit in the Euro area. Commercial banks are using the funds to make new loans, while credit standards to private enterprises are predicted to continue to ease. Additionally, the report showed that there was a dramatic increase in the number of banks that now foresee demand for corporate loans to rise in the second quarter. The Frankfurt-based central bank cut interest rates to a record low level of 0.05% and launched the process of injecting 60 billion euros a month into the Euro zone economy through bond purchases in order to stimulate economic growth in the region. The quantitative easing programme is expected to last until at least September 2016.
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