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European industrial production dropped by the most on record in January as the deepest global recession in more than six decades forced companies to cut output and curb investments.

Production in the euro region fell 17.3 percent from the year-earlier month, the biggest decline since the data series began in 1986, the European Union’s statistics office in Luxembourg said today. The January plunge exceeded the 15.5 percent drop forecast by economists in a Bloomberg survey. From the previous month, output fell 3.5 percent.

European manufacturers are cutting production, scrapping investments and firing workers as the worsening slump curtails orders for products from eyeglasses to automobiles. ThyssenKrupp AG, Germany’s largest steelmaker, yesterday said it may eliminate more than 3,000 jobs after demand for the metal plunged.

“The dreadful industrial-production figures for January confirm that the euro-zone recession is deepening rapidly,” said Martin van Vliet, senior economist at ING Bank in Amsterdam. “Further macroeconomic stimulus is urgently required.”

EU leaders meeting in Brussels rejected charges that they aren’t doing enough to counter the worldwide recession. “Good progress” is being made in implementing stimulus plans already pledged, according to the draft of a communiqué to be issued after the summit ends this afternoon.

The euro-area economy will contract 3.2 percent this year, the International Monetary Fund forecast yesterday, worse than the 2 percent slump it projected in January.

Euro, Stocks

The euro moved lower against the dollar after the output data were released, trading at $1.3454 at 10:55 a.m. in London, down 0.8 percent. The Dow Jones Stoxx 600 Index of European stocks fell 1 percent.

Industrial production in Germany, Europe’s largest economy, dropped 7.5 percent from December, the sharpest slide since data for a reunified Germany began in 1991 fast cash now. Output in France, the second-biggest economy in the euro area, dropped 3.1 percent.

Carmakers in Europe are likely to build 25 percent fewer vehicles this year as the global slump erodes sales, the European Automobile Manufacturers Association estimated on March 5. Volkswagen AG, Europe’s largest automaker, is cutting 16,500 temporary jobs and Bayerische Motor Werke AG, the world’s biggest luxury-car manufacturer, eliminated 4,000 jobs last year and will cut 1,000 more in 2009.

‘Fallen Substantially’

“Industrial orders have been declining for nearly a year and foreign demand for European products has fallen substantially,” said Carsten Brzeski, an economist at ING Groep in Brussels. “The European Central Bank will certainly lower interest rates to 1 percent but will be very hesitant to go below that unless the economy doesn’t stabilize.”

The ECB is under pressure to outline a strategy for how it would help the euro-region economy once it runs out of room to cut interest rates. The Frankfurt-based central bank reduced the benchmark rate to a record low of 1.5 percent on March 5.

“Unlike other central banks, we have not completely exhausted our margin for maneuver on interest rates,” ECB council member Guy Quaden said in an interview with Belgium’s Trend-Tendances magazine published yesterday, adding that a rate of 1.5 percent is not the lowest point.

Economists had expected a 4 percent drop in January industrial production from the previous month, according to the medium of 38 estimates in a Bloomberg survey. The December drop in output was revised to 2.7 percent from the earlier estimate of 2.6 percent. The decline from the year-earlier month in December was revised to 11.8 percent from 12 percent estimated before.

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