Seasonally adjusted measurement of output was down 1.3% in the eurozone and 1.7% in the EU compared to one year earlier, the European Union data agency said. Ben May, European economist at Capital Economics, said that with business surveys still pointing to further falls in production, it was unlikely that the industrial sector was on the cusp of a sustained recovery.
Combined with recent data out of the region, Mr May said there was a "strong chance" that GDP fell again in Europe in the first quarter of the year.
Annalisa Piazza from Newedge Strategy, said the worse-than-expected fall was not a "major" surprise, as industrial activity was pushed down by a sharp decline in capital goods and durable consumer goods production in January - the sectors that suffer the most from a declining business cycle.
"Part of the decline in the aforementioned sectors might be corrected in the coming months but we rule out any sharp acceleration anytime soon," she said.
She added that there were "no prospects of a solid underlying improvement in the business cycle" expected in the near term.The disappointing figures come a week after Eurostat confirmed its estimate that GDP fell 0.6pc in the fourth quarter.
Euro fall in the final three months of 2012 is the biggest quarter-on-quarter fall in a year of contraction.
The worse-than-expected decline - the deepest since the first quarter of 2009 - was driven by GDP slumps in the bloc's major economies, including a shock 0.6pc contraction in Germany and a 0.3pc fall in French output in the fourth quarter.