INDUSTRIAL output in the eurozone bounded ahead in August, surprising analysts who said it would make it easier for the European Central Bank to put up interest rates.

Production by factories in the 12-nation bloc rose by 0.8 per cent, well above analysts’ expectations of a 0.1 per cent rise and the biggest jump since April, figures from Eurostat showed. That took annual growth to 2.6 per cent, against earlier expectations of a much more modest 1.1 per cent increase over the year.

The data showed firm growth in industrial activity in France, Italy and Spain, but in Germany output declined by 1.8 per cent over the month, reversing a recent recovery trend. Production rose most strongly in the Irish Republic, where factory output soared by 16.7 per cent.

Audrey Childe-Freeman, of CIBC World Markets, said: “It confirms our more positive view for the eurozone economy for the third and fourth quarters in the manufacturing sector and that should also spill over to the rest of the economy — it’s a new, convincing sign of a rebound.”

The figures will strengthen the hand of hawks at the ECB who wish to raise interest rates from their current level of 2 per cent to deal with rising inflationary pressures from high oil prices. Financial markets are pricing about a 30 per cent chance of the ECB raising interest rates by December, and are widely expecting a rise by the middle of next year.

Comments from Jean-Claude Trichet, the ECB President, that the Bank is “strongly vigilant” to inflationary pressures have cemented the view that it is keen to raise rates sooner rather than later.

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