Eurozone recovery clouded by poor industrial output

The Eurozone's industrial output for June fell behind economists' expectations, placing a cloud over hopes of an economic recovery for the single currency.

 

Eurostat's industrial production data, released earlier today, shows how the volume of production from industries such as factories and manufacturing has been changing month-on-month and year-on-year.

 

In the single currency zone, seasonally-adjusted industrial output went down by 0.3 per cent between May 2014 and June 2014, while for the whole of the European Union the decrease was 0.1 per cent.

 

The monthly drop was caused mainly by a 1.9 percent fall in production of non-durable consumer goods, down for a second consecutive month, and a 0.7 percent decline in energy production, which was up in the previous three months.

 

The poor performance is thought to have been caused by escalating geopolitical tensions in Ukraine, Iraq and Gaza.

June's monthly figure is a slight improvement on May, when output was down by 1.1 per cent for both the Eurozone and the wider European Union. Nonetheless, expectations for June were of a 0.3 per cent rise, and failure to meet this has resulted in a more pessimistic outlook. 

 

"This is a very disappointing figure after the already strong contraction in May," said Peter Vanden Houte, chief Eurozone economist at ING.

 

Compared to June 2013, output remained stable in the Eurozone and rose by 0.7 per cent in the European Union. Once again, this failed to meet economist expectations of a 0.1 per cent annual increase in June. In fact, the annual reading was it's lowest since August 2013. 

Germany's industrial output fell 0.4 percent year-on-year in June, which represents the country's first annual drop since July last year.

 

Other Eurozone countries, meanwhile, saw improvements in their year-on-year output performance. France's remained unchanged, which was its most positive result since December 2013, while Italy's went up by 0.4 per cent following a 1.7 per cent decline the month before.

 

The negative results may well serve as a catalyst for the introduction of increased stimulatory measures by the European Central Bank (ECB), which is already expected to keep interest rates at their near record lows for longer than was originally planned.