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By Jan Strupczewski
BRUSSELS, Oct 14 (Reuters) - Euro zone industrial output accelerated month-on-month in August and July production was revised upwards, data showed, providing evidence the area's economy is likely to have started growing in the third quarter.
Industrial output in the 16-country zone rose 0.9 percent on the month in August, leaving production 15.4 percent below the year-earlier level, the European Union's statistical body said on Wednesday. For graphics see:
http://graphics.thomsonreuters.com/109/EZ_INDPMI1009.gif
Economists polled by Reuters had on average expected a 1.0 percent monthly rise and a 15.5 percent annual decline.
Eurostat revised upwards its July data to a 0.2 percent monthly rise from the previously reported 0.3 percent fall, making August the fourth straight month of month-on-month gains. It kept the July year-on-year rate unchanged at minus 15.9 percent.
"Output is now ... up for the fourth consecutive month in August. This points to a surge in industrial output in the third quarter and confirms the view that gross domestic product should also have grown robustly last quarter," said Nick Kounis, economist at Fortis.
"However, the economy will probably lose some momentum as the impact of the car incentive schemes fizzles out," he said.
"The big picture of the coming quarters will be one of an ongoing gradual upswing in the euro zone economy on the back of a V-shaped recovery in global growth," Kounis said.
Industrial production accounts for roughly 17 percent of euro zone GDP. Many economists expect the area's economy to have grown 0.3 percent in July-September against the previous three months. But some expect even more.
"Overall, the new data profile points to a stronger picture than we had expected before today's release," said Marco Valli, economist at UniCredit. "Accordingly, risks to our 0.4 percent GDP forecast for the third quarter are to the upside," he said.
Production of durable consumer goods rose the most in August, up 5.3 percent on the month, pointing to a pick-up in consumer demand. The output of capital goods, used in investment, produced the second highest gain at 1.1 percent, while intermediate goods and energy rose 0.5 percent each.
"Increasing signs of stabilisation in capital goods production suggest that the capex recession is easing," Valli said. Production of non-durable consumer goods, such as food, fell 1.3 percent against July.
Economists said that production should keep rising in the near term as the orders-to-inventories ratio, a good gauge of manufacturing momentum, continues to increase, pointing to further improvement.
"Nevertheless, some caution is needed. Despite the August increase, output is more than 15 percent below its August 2008 level," said Clemente de Lucia, economist at BNP Paribas.
"The excess of spare capacity should limit investment," de Lucia said. (Reporting by Jan Strupczewski; Editing by Dale Hudson/Ruth Pitchford)