EU Economy
Euro Area industrial production dips in June and May after a flat April
By Michael Hennigan, editor and founder of Finfacts
Aug 13, 2015 - 8:55 AM

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Euro Area industrial production fell in June and May after a flat April, signalling the fragility of the current recovery.

In the month of June 2015, seasonally adjusted industrial production1 fell by 0.4% in the Euro Area (EA19) and by 0.2% in the EU28 , according to estimates from Eurostat, the statistics office of the European Union. In May 2015 industrial production decreased by 0.2% and 0.1% respectively. In June 2015 compared with June 20144 , industrial production increased by 1.2% in the Euro Area and by 1.7% in the EU28.

Germany’s industrial production dropped by 1.4% month on month in June and the fragility of China and other emerging economies puts risks on the downside.

Eric Heymann, Deutsche Bank economist, said this week that German manufacturers increased output by 0.2% qoq in real terms in Q2 2015. "However, growth will probably be slower in H2 than anticipated to date. Therefore, we are revising our forecast for 2015 output to the downside — from 1.5% so far to 1% (both in real terms). The moderate uptrend is roughly set to continue in 2016. Manufacturing output could climb by 1% again in the coming year. This means its growth rate would continue to fall short of the long-term average. Furthermore, manufacturing's share in Germany's total gross value-added would decline."

Heymann added: "Company releases of H1 figures have prompted us to revise our output forecasts for several sectors. For the automotive industry we now look for 3% higher output in real terms (previously +2%). The sector is a beneficiary of the increasing demand from the US and Europe (excluding Russia) in particular. A statistical effect also plays a part: the data for the production index in the automotive industry were recently corrected retroactively to the upside. We have lowered our forecast for mechanical engineering to stagnation (from 2% previously). Given moderate to low utilisation levels in many key markets, investment activity is picking up only sluggishly.

Hence, the anticipated positive effects of the euro weakness on Germany's mechanical engineers have been only modest so far. The recession in Russia has hurt the sector in particular. Our forecast for electrical engineering has been reduced from 1.5% to 1%, for the metals industry from 1.5% to 0.5%. Chemicals industry performance (excluding pharmaceuticals) looks set to disappoint for the time being. In this case we have revised our outlook for 2015 output down from 1.5% to stagnation. We have left our forecast for the food sector unchanged at 0.5%."

Monthly comparison by main industrial grouping and by member country: Eurostat said the decrease of 0.4% in industrial production in the Euro Area in June 2015, compared with May 2015, is due to production of durable consumer goods falling by 2.0%, capital goods by 1.8% and intermediate goods by 0.5%, while production of non-durable consumer goods remained stable. Production of energy rose by 3.2%.

In the EU28, the decrease of 0.2% is due to production of capital goods falling by 1.2%, durable consumer goods by 0.4%, non-durable consumer goods by 0.3% and intermediate goods by 0.1%, while production of energy rose by 1.5%. Among member countries for which data are available, the largest decreases in industrial production were registered in Croatia (-2.9%), Portugal (-2.1%) and Ireland (-2.0%), and the highest increases in Denmark (+4.2%), the Netherlands (+3.9%) and Slovakia (+1.4%).

Annual comparison by main industrial grouping and by member country: The increase of 1.2% in industrial production in the Euro Area in June 2015, compared with June 2014, is due to production of non-durable consumer goods rising by 2.5%, capital goods by 1.7%, intermediate goods by 0.2% and durable consumer goods by 0.1%, while production of energy remained stable. In the EU28, the increase of 1.7% is due to production of capital goods rising by 2.4%, durable consumer goods by 2.2%, energy by 1.7%, non-durable consumer goods by 1.5% and intermediate goods by 0.8%

Among member countries for which data are available, the highest increases in industrial production were registered in Ireland (+27.6%), Denmark (+7.6%), Lithuania (+6.9%) and Slovakia (+6.4%). Decreases were observed in Greece (-4.6%), Estonia (-3.4%), the Netherlands (-2.4%), Finland (-1.1%) and Italy (-0.3%).


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