By Martin Santa

BRUSSELS (Reuters) - Industrial output from euro zone factories defied market expectations of a month-on-month decline and rose in April, data showed on Wednesday, but the pace of expansion was slowed by a drop in production of energy and durable consumer goods.

Industrial production in the 17 countries using the single currency rose by 0.4 percent on the month, after a nearly two-year high jump of 0.9 percent in March, the data from the EU statistics agency Eurostat showed.

Economists polled by Reuters had expected a 0.2 percent fall.

The bloc's economy remains crippled by the impact of the sovereign debt crisis as governments continue growth-slowing fiscal consolidation, millions of Europeans are out of jobs and small- and medium-sized companies are struggling to get credit.

"While April industrial production data are relatively encouraging, the euro zone manufacturing sector is not yet out of the woods," said Howard Archer, chief European economist at IHS Global Insight.

"Indeed, conditions remain far from easy for euro zone manufacturers."

The pace of the bloc's economic contraction slowed in the three months to March, compared to the previous quarter, but Europeans facing stressed labor markets remain reluctant to spend, preventing a more dynamic rebound.

The European Central Bank (ECB) still expects a gradual recovery later in the year, but sees downside risks.

The ECB left interest rates unchanged at record lows last Thursday and slightly lowered its economic outlook for the euro area this year, saying the economy would shrink 0.6 percent in 2013 but grow again by 1.1 percent next year.

Industrial production in April was influenced by a 1.5 percent drop in energy output month-on-month, the first decline in four months, and a 2.7 percent fall in the production of cars, electronics and other durable consumer goods.

Eurostat revised its industrial production figure for March downward, to show a rise of 0.9 percent from 1.0 percent.

Compared to April a year ago, industrial production fell 0.6 percent after a revised 1.4 percent fall in March, the data showed.

Germany, Europe's biggest economy, reported a 1.2 percent monthly rise in April from the previous month, while second placed France swung back to a rise, with 2.3 percent growth month-on-month.

Italy showed a third consecutive monthly decline, sliding 0.3 percent.

Manufacturing from Germany, France, and Italy accounts for two-thirds of the euro zone's output.

For details of Eurostat data click on: http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

(Reporting by Martin Santa; editing by Rex Merrifield)

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