Euro Zone Industrial Output Unexpectedly Drops in July

Industrial production in the euro zone unexpectedly declined in July for the second consecutive month, setting a dull mood for the third quarter.

Official data published by a European Union statistics agency on Wednesday showed output at factories in the 19-country currency bloc slipped 0.8 percent in July and 0.1 percent year-on-year.

The figures were more than what economists had anticipated as they expected a 0.5 percent drop on a monthly basis and a 1.0 percent increase from the previous year.

Slump in monthly output was the result of a 1.9 percent tumble in the production of durable consumer products like automobiles or fridges, which indicate manager’s forecast of weaker consumer appetite for bigger spending.

Over the same period, output of non-durable consumer goods such as dairy, fish, and other food items climbed 0.5 percent, while production of capital products advanced 1.4 percent.   

The agency also adjusted its data for June, stating that industrial production shrunk 0.8 percent on the month which was larger than earlier estimate of 0.7 percent, while year-on-year was revised to a 2.3 percent rise from 2.5 percent.

France Offsets Industrial Output Drop in Germany and Italy

Weakness in the euro zone economy was mainly due to disappointing figures from Germany, the biggest economy in the bloc, and Italy, which has suffered a rough month of July on market concerns over huge spending plans of its new euro-skeptic government.

Industrial output of the two countries fell 1.8 percent in July. This was the first decline in production for Italy, the bloc’s third-largest economy, in over two years. Germany also reported sudden weakness in July industrial orders.

Still, negative data from the two countries was partially offset by a 0.7 percent gain in the production of France, the euro zone’s second biggest country.

This should prove to be more food for thought for Italian political actors currently negotiating the content of the next budget, according to analyst Paolo Pizzoli.

Market tensions over Italy have softened in the past ten days after the government said it was dedicated in reducing its large debt and containing deficit in its budget for 2019, which will be finalized by October.

While output tends to be very volatile, the industry’s apparent slowdown in the first month of the third quarter could suggest weaker economic growth.

The statistics agency will present its preliminary flash estimate of the euro zone’s expansion in the third quarter on October 30.

Although the latest data were disappointing, the situation were not as bad as the figures showed, as the slump followed an unexpected strong improvement in production in the second quarter, according to senior European economist Jack Allen.

HQBroker is here to give you a daily news roundup about the forex, commodities, technologies, automobiles, and economies. You can open an account now and make yourself updated with essential news in the market. Share your thoughts and experiences with us by commenting your HQBroker reviews.