Eurozone Industrial Production Fails In October

By Arthur Greene December 14, 2016

Eurozone industrial output dipped in October for the second consecutive month against expectations of a slight rise as production of intermediate and non-durable consumer goods dropped in a sign of muted growth in the fourth quarter according to data from Eurostat showed Wednesday.

The industrial output slid 0.1 percent month-on-month, much slower than the 0.9 percent decline seen in September but in contrast to a 0.1 percent rise economists had expected.

There was a recovery in energy production for the month with output for capital goods and durable consumer goods recovering slightly from sharp losses in September, but production of non-durable consumer goods declined.

Among components, non-durable consumer goods decreased 1.5% and intermediate goods output by 0.5%. Meanwhile, durable consumer goods and capital goods output rose 1.5% and 1%, respectively. Production of energy moved up 0.8%.

There was a marginal increase in German production, while French output declines for the second successive month and Italian production was unchanged. On an annual basis, there was a modest increase in German and Italian output, while French production declined 1.8%.

Pantheon Macroeconomics chief Eurozone economist Claus Vistesen said: “A downbeat headline, mainly due to weakness in France which offset a rise in Spain. Production in Germany rose a marginal 0.1% month-to-month, while it was flat in Italy. In addition, weakness in the smaller economies, including a 3.6% plunge in Ireland, weighed on the headline.”

“This signals a poor start to Q4, but we’re confident data in the rest of the quarter will be better. Surveys point to accelerating growth year-over-year, and we think industrial production will increase about 0.5% quarter-on-quarter in Q4, marginally higher than the 0.4% increase in Q3. In addition, the separate construction data for October next week also likely will tell a more upbeat story on the outlook for investment in Q4” Vistesen added.

Carsten Brzeski, Chief Economist at ING, suggests that the industrial production fails to match positive sentiment indicators and gives the Eurozone economy a stumbling start to the final quarter of 2016.

“Industrial production in the Eurozone disappointed as it dropped by 0.1% MoM in October, from -0.9% MoM in September. It was the second time this year that industrial production dropped in two consecutive months. On the year, industrial production was still up by 0.6%, from 1.3% in September. However, today’s drop is a cold shower for Eurozone optimists and shows that the real economy is clearly running behind rather positive soft indicators.”

“Today’s weak industrial production data adds to a rather disappointing long trend. Over the last six years, average monthly growth in industrial production has been zero. The industrial weakness in the Eurozone does not only look cyclically but also structurally” Carsten said.

On a yearly basis, industrial production growth halved to 0.6% from 1.3%. Output was forecast to grow 0.8%.

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