Eurozone industrial production declined at the fastest pace since record began in early 1990, weighing down on the first quarter GDP.

Industrial production slipped at a record 20.2% in March from the previous year, the European Union's statistical office, Eurostat said Wednesday. Production fell more than an expected 17.6%. In February, output was down by 19.1%, revised down from 18.4% estimated originally.

Production dropped at a slower pace of 2% in March compared to 2.5% decrease in February. Economists had expected only a 1% fall for March.

Compared to March 2008, production of non-durable consumer goods and durable consumer goods dipped 7.2% and 23.2%, respectively in the euro area. Capital goods output slid 23.5% and energy production was down 9.2%.

In the EU27, industrial output fell 1.9% taking the annual fall to 18.8% in March. All member states reported decline in production. The biggest annual decreases were registered in Estonia, Luxembourg and Spain. Meanwhile, Greece showed the smallest decrease of 5.8%.

The record contraction in industrial production is expected to have a severe impact on the economy's performance in the first three months of the year. The Eurostat is scheduled to release the first quarter national quarterly account on May 15. The economy is expected to contract 2% sequentially in the first quarter, following a 1.6% decline in the fourth quarter.

Elsewhere on Wednesday, the Munich-based Ifo Institute for Economic Research said its economic climate index for the Eurozone rose to 55.1 in the second quarter from 45.8 recorded in the first quarter. That was the first improvement since autumn 2007.

The rise in the Ifo indicator was a consequence of less negative expectations for the coming six months. The economic expectations index rose to 76 from 49.6. However, the assessments of the current economic situation have worsened further and now stand at an all-time low of 29.9.

The current economic situation has been assessed as very unfavorable in all countries of the euro area without exception.

The average annual inflation expectations for 2009, at 1%, are clearly below the target level of the European Central Bank, the Ifo said.

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