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Gloom for eurozone as industrial production falls unexpectedly

13 August 2014, 16:33 CET
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Gloom for eurozone as industrial production falls unexpectedly

Photo © benjaminnolte - Fotolia

(BRUSSELS) - Industrial production in the eurozone fell by 0.3 percent in June, official data showed Wednesday, in another blow to an already tepid recovery that might have already reached its peak.

A raft of economic data in recent days, including a return to recession in Italy and waning investor confidence in Germany, has indicated problems may be deepening for the eurozone only a year after the bloc exited six straight quarters of recession.

The industrial output figure, which was flat over 12 months, was significantly below analyst expectations.

They had pencilled in an expansion of 0.3 percent for the period, following a 1.1-percent fall a month earlier.

"This is a very disappointing figure after the already strong contraction in May (caused by additional holidays in some countries)," said analyst Peter Vanden Houte from ING Bank in Brussels.

"For the quarter as whole, industrial production contracted by 0.4 percent, which doesn't bode well for second quarter GDP growth to be published tomorrow (where) a growth figure of 0.2 percent now seems to be out of reach," he added.

The first estimate for second quarter growth in the eurozone lands on Thursday and analysts are braced for bad news, with forecasts set for an already meagre 0.2 percent expansion, the same as in the previous quarter.

Germany and France, the single currency bloc's biggest economies, will also release growth figures Thursday, in the wake of other national figures that have been discouraging.

In a surprise, Italy said it fell back into recession in the second quarter and Belgium eked out only 0.1 percent growth.

Spain, which was supposed to be bouncing back soundly from years of deep crisis, managed only 0.6 percent growth despite expanding exports.

The drop-off in production announced Wednesday was caused mainly by a 1.9-percent drop from non-durable goods and a 0.7 percent fall in energy.

"Looking ahead, survey measures continue to point to only sluggish industrial production growth at the start of Q3, adding to signs that the wider euro-zone recovery may have already peaked," said Jessica Hinds of European economist for Capital Economics.

Analysts are forecasting that the French economy expanded 0.1 percent, with contraction only averted by a late winter spurt in household demand for energy.

The export-dependent German economy is believed to have contracted by 0.1 percent, a concerning reversal after being the eurozone's saving grace throughout the years of crisis doldrums.

"Since the economy in the eurozone is not gaining momentum either, the signs are that economic growth in Germany will be weaker in 2014 than expected," the ZEW economic institute said on Tuesday after releasing lacklustre investor confidence data.

The ZEW data "shows that recovery of the German economy is on shakier legs that people would have thought until very recently," said Postbank economist Heinrich Bayer.

Broken down by country, the strongest drops in industrial output were seen in the eurozone periphery with a sharp drop of 16.5 percent in Ireland. The Netherlands fell off by 3.0 percent.

Germany eked out a gain of 0.2 percent, while France rose by 1.2 percent.

Across the 28 country EU, industrial production fell by 0.1 percent on the month, but gained 0.7 percent on a 12-month basis.

Industrial production down by 0.3% in euro area [Eurostat]


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