LONDON (AFX) - Euro zone economic figures due for release this week will show ongoing weakness in the industrial sector, economists said. They said France is expected to post yet another contraction in both the industrial and manufacturing sectors for December, while Italian industrial output is forecast to have fallen year-on-year but to have risen from November.
UBS Warburg economists said that while industrial surveys started to turn at the end of December, this would not necessarily translate into a recovery in industrial ouput until the release of first quarter figures.
"This is firstly because production data lag surveys, but also because the improvement in business confidence owes much to the improvement of prospects," UBS Warburg economists said. "By contrast, questions on actual production remain very depressed. As a consequence, we, once again, expect very weak industrial production numbers with the annual rate of change moving further into negative territory," they said.
Schroder Salomon Smith Barney economists agreed: "Manufacturing output probably contracted for the fourth month in a row in France in December, as the Bank of France's monthly survey of business reported longer factory shutdowns around Christmas than seasonal norms would suggest."
They said the overall industrial production index probably fared better in both December and the fourth quarter as cold weather boosted electricity output.
"In any case, December probably marked the low point for French industrial production, as both the Bank of France and INSEE surveys report a rise in output expectations as well as a lesser share of firms regarding their stocks as excessive," SSSB economists said. As for Italy, they said preliminary estimates based on energy consumption point to a rebound of industrial activity in December following three consecutive monthly contractions. "Still, the expected improvement probably will unwind only partly the sharp November drop and leave average production in the fourth quarter 1.8-1.9 pct below the third quarter level after a contraction of 0.5 pct quarter-on-quarter in July-September," SSSB economists said.
Otherwise, France is expected to record a further deterioration in job creation.
"Looking ahead, we don't think the situation will improve," UBS Warburg economists said.
"The labour market is a lagging indicator of activity and, as such, we expect job creation to fall even further in the first quarter this year before it starts accelerating," they said.
Despite ongoing concerns about Germany, the euro zone's largest economy is expected to post December retail sales that are up year-on-year. The figure is however forecast to be down on the previous month.
The German trade balance is expected to have shrunk in December due to seasonal effects, with the current account slipping into deficit. "The German economy is the weakest in Europe. It has stagnated for the past six months," ABN Amro economists said.
"This poor cyclical performance follows a decade in which Germany grew far more slowly than the rest of the euro zone. There is little sign of relief," they said.
Economists' forecasts for euro zone indicators due for release Feb 11-15:

AFX CONSENSUS PREVIOUS

TUESDAY FEB 12
German Dec trade balance (bln eur) +3.4 +5.9

German Dec current account (bln eur) -3.2 +0.2

THURSDAY FEB 14
German Jan WPI
month-on-month (pct) +1.6 +0.1

year-on-year (pct) +0.1 -1.5

German Dec retail sales
month-on-month (pct) -0.6 +1.6

year-on-year (pct) +1.0 -0.4

FRIDAY FEB 15
German Jan final HICP
month-on-month (pct) +0.9 +0.1

year-on-year (pct) +2.2 +1.5

French prel Q4 non-farm payroll
quarter-on-quarter (pct) 0.0 +0.2

year-on-year (pct) +1.3 +2.3

French Dec trade balance (bln eur) +1.8 +2.1

French Dec industrial output
month-on-month (pct) -0.3 0.0

year-on-year (pct) -0.9 -0.3

French Dec manufacturing output
month-on-month (pct) -0.2 -0.3

year-on-year (pct) -2.3 -1.9

Italian Dec industrial output
month-on-month (pct) +1.5 -2.6

year-on-year (pct) -6.2 -5.7